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IPE special report May 2018

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IBM US pension freeze prompts UK fears

UK - Members of IBM’s UK pension fund may be fearing for their own plan after the computer giant's decision to freeze its US defined benefit plan, a pensioner representative has said.

The company yesterday said it would freeze its US DB scheme and “redesign” its 401(k) savings plan by January 2008.

According to IBM, pension plan changes for 2006 are under review “in several other countries”. One report stated that the move is part of a global shift from DB to DC schemes. The firm believes it will have “competitive advantages” in attracting workers and managing costs.

The move has caused jitters among the computer giant’s pensioners in the UK, where IPE understands IBM closed its DB scheme to new members in 1997 and introduced a DC scheme.

According to Brian Marks, chairman of the Association of Members of IBM UK Pension Plans (AMIPP), the firm’s decision has to be seen against the backdrop of recent DB closures and changes in the UK.

He told IPE: “It would be surprising if the IBM UK DB scheme members did not fear a freezing of the scheme or a continued degrading so as to make the DC scheme appear more attractive by comparison.”

One entry on the AMIPP website questioned what the decision meant for the UK, especially in light of a guarantee last year to retain the DB plan until 2013.

But the person was told that this decision by the UK Trust is “backed entirely” by the IBM World Trade.

“Given IBM Corp.'s involvement in the setting up of that guarantee, it cannot possibly come back to the UK and try to extricate itself before 2014,” the unnamed respondent said. “The only way IBM Corp can dissolve the promise is to dissolve IBM World Trade.”

A spokesperson for IBM in the UK stated that he could not speculate on whether the decision in the US will also impact the IBM UK pension scheme, which is pegged at €5.4bn in ‘International Pension Funds and their Advisers’.

According to the IBM press release, the shift of risk to employees will not affect its current 125,000 retirees or employees retiring before the 1 January 2008 cut-off.

“All benefits earned through year-end 2007 by participants in its pension equity and cash balance plans will be preserved as of that date. These benefits will be available to participants when they leave IBM, under the same payment options currently in effect,” said the statement.

The change is expected to save the Corporation between $450m (€370.5m) and $500m in 2006, and between $2.5bn and $3bn between now and 2010.

The UK fund has a reported 10,000 pensioners and 11,000 deferred pensioners.

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