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IBM Pension Scheme

I am delighted to have the opportunity to raise this matter today. Given the number of hon. Members in the room for a short debate, it is a pity that we could not have had a longer one. I have received representations from the hon. Members for Isle of Wight (Mr. Turner), for Croydon, Central (Mr. Pelling) and my hon. Friend the Member for Solihull (Lorely Burt), who have expressed support for what I am about to say. Many other hon. Members and I have received large numbers of representations as a result of IBM's proposed changes to one of its pension schemes. The proposals have particularly impacted on workers in their 50s, who had carefully planned their retirement. Many of those employees feel aggrieved on two levels. First, they feel let down by IBM, which made certain promises about pensions a few years ago and is using the changes to force workers to retire earlier than planned. Secondly, they feel aggrieved that the Government's pension law does not provide them with sufficient protections. It might be helpful to the Minister if I provide a little background. In 2003-04, many IBMers with a final salary scheme agreed to increase their pensions contributions by 50 per cent. There was much unhappiness about having to do that because the company had taken a pensions holiday for several years and also took funds from the final salary plan to fund the new defined contributions plan. In 2006, further changes were made to the defined benefit plan and there was a clear attempt to move workers to an enhanced defined contributions plan. Workers who did not transfer were effectively punished because they were told that only 67 per cent. of future salary increases would count towards the pension. That makes something of a mockery of the fact that it was supposed to be a final salary plan. Although there was some unhappiness, the company ultimately managed to sell the scheme by promising that funding would be available until 2014 and that there would be no further changes until that date. Let us fast forward three years to 2009, when, seemingly out of the blue, IBM announced further changes. Employees were understandably unhappy that IBM proposed to close the final salary scheme, although there has been an acknowledgement from some that that is the way many company pension schemes are going. There was also concern about the timing of the consultation, which was over the summer holiday period when many people were taking a break, and there was a feeling that the consultation period should have been extended. In the annual report from the pensions trustee, the trustee stated""The trustee feels that the Company has not lived up to the Trustee's expectations"" in asking to change the plan and the scheme so soon after the changes made in July 2006. That is quite a telling and unusual statement. Unfortunately, to add insult to injury, IBM made some hard-hitting changes to the early retirement terms and conditions and that has had a significant impact on workers who had planned to retire over the next few years. The current scheme was that any employee retiring early would have 3 per cent. deducted from the pension for each year they are under the age of 60. That effectively compensates for the fact that a person will be receiving a pension for a longer period of time. For example, someone retiring at 54 with an estimated pension of £20,000 would have it reduced by 18 per cent. to £16,400. The changes effective from April mean the discount is calculated differently. The calculation is now based on age before 63, with a market reduction that is estimated to be 6 to 7 per cent. So if we assume a 6 per cent. rate, the reduction in the above example would be 54 per cent., giving a pension of only £9,200. As one constituent put it to me:""They are effectively stealing £7,200 every year for the rest of your life"." Much of the correspondence received has been rather emotive, for example:""In short, IBM is a very wealthy and very successful company, even in the midst of the credit crunch. It's not a question of IBM not being able to afford to fund its pension scheme, it's a matter of IBM, choosing instead to give the 'saved' money to its shareholders.""