Pension scheme changes enrage employees

MikeJones_2

This is one for the pension pros, but might also be of interest to those regular lurkers who know their pension stuff.

It's also likely to be of interest to members of defined benefit schemes who are concerned about future changes that might take place to their scheme.

I'd highly recommend reading this little gem of a debate from Wednesday in the House of Commons involving the IBM Pension Scheme.

I can't comment on the piece as there is an impending court case but it's very insightful.

I suspect there are more than a few sponsoring employers and boards of trustees watching this case very carefully.

See:
- IBM Pension Scheme (www.parliament.uk - House of Commons - Hansard) (pdf-12pages)

If anybody cares to comment, I'd be interested to know your thoughts on the content.

Mike

I work in the field of Pension Education and Pension Guidance in the UK. I am a member of the Specialist Pensions Forum as well as being a Voluntary Adviser for The Pensions Advisory Service. I work with scheme members, employers, trustees, scheme administrators and advisers on most things to do with employer sponsored pension schemes. The views expressed by me in this thread are my personal opinions. You should seek professional advice from an appropriately experienced and qualified adviser. I am not an IFA.

MrChips

It's hard to comment too much as only one side of the story is being expressed here. Taking the comments at face value, it does seem harsh of IBM to make these changes, although in general they are entitled to (what they are specifically allowed to do will depend on the Scheme Rules etc).

Making future pay rises non-pensionable, or not fully pensionable is becoming increasingly common as a way of controlling costs and risk for an employer. Whether it is justifiable depends on the finances and prospects of the sponsoring employer, although it clearly isn't in the spirit of a "final salary" scheme.

Early retirement factors are frequently reviewed by pension schemes, although they are usually set at the discretion of the Trustees rather than the Company so I'd be interested to see who has the power to set them at IBM. Such factors are usually relatively stable over time. I would say that 3% pa is rather generous, although the new proposal from IBM seems very penal - somewhere in the middle would be about right. In my experience, it isn't common to announce future changes in factors so the fact that they have been made so ungenerous and then announced the changes ni advance does smell like "encouraging early retirement".

I assume flexible retirement isn't an option at IBM? Otherwise I would take my accrued benefits now and carry on working!

TMFTP

I'd now be interested in what's happening in the Trustees meetings, and what the requirements of them are in the Scheme rules / trust deeds.

All / all member nominated Trustees resign en masse? That might stop IBM making any changes to the Scheme at all - at least until more are installed.

It would also send a message to large corporates.

However, it may also give them the incentive to get even more petty.

Shocking behaviour from a large Corporate. Very....American....