Union slams IBM over pension changes

IBM has been taken to task by the UK's largest union over proposals to alter its final salary pension scheme.

According to Unite, IBM plans to close the scheme to future accrual for existing employees, and is changing the terms for those opting for early retirement. The news has sparked thousands of complaints from IBM workers.

The company has around 18,000 UK employees spread across major sites in Portsmouth, Hursley, Warwick, London, Greenock and the North West.

"The latest IBM proposals, whilst modifying some of the detail and mitigating some of the impact in the short term, do little to alter the substance of the company's original proposal, and still propose the closure of the defined benefit pension scheme and replacement with a vastly inferior money purchase scheme," said Peter Skyte, national officer of IT and communications at Unite.

"Bizarrely the National Association of Pension Funds announced the award of a pension quality award to IBM earlier this week, which only rubs salt into the already suppurating wounds of long-serving IBM employees."

IBM recently revised its plans for the scheme, putting back the closure of the final salary system to future accrual by one year to April 2011, but with the early retirement changes kicking in from April 2010.

Furthermore, IBM will impose limited enhancement of company contributions to the defined contribution money purchase scheme for two years for those transferring, and the retention of current death benefit and ill health provisions.

Figures suggest that IBM's operating margin is expected to grow to 18.5 per cent in 2009, up from 16.1 per cent last year.

"These proposals and current forecasts of increased IBM profit margins this year demonstrate all too clearly that one IBM employee's pensions pain is an IBM executive's pay and bonus gain," said Skyte.

The union is also predicting that between 700 and 1,000 IBM staff may opt for early retirement prior to April 2010 when the new early retirement provisions apply, and that those in their mid-fifties will lose as much as £200,000 as a result.

IBM has several defined benefit pension plans which it is seeking to close, and is nearing the end of a 60-day consultation period with a pension consultative committee of employee representatives including Unite members.