Mike Hancock News
MP demands IBM rethink pension cut plan that is causing shock and anger
Mike Hancock is demanding that IBM, which has its UK headquarters in Portsmouth, drop its plan to cut the pension that it pays company employees, which in some cases may lead to a loss of over 20%. Additionally, he is demanding an urgent meeting with the Chief Executive of IBM in the UK and the Secretary of State for Work and Pensions to discuss the situation.
The company wants to close its final salary scheme to existing members in the UK. It has already banned new employees from joining the scheme. But it told current employees that the final salary scheme would continue until at least 2014. The change means that employees with 30 or 40 years service to the firm could see their company pension cut by at least 20% if they retire after 10th April 2010.
There is a legal requirement for 60 days consultation by the company but trade unions say that the company is just going through the motions. There have already been angry meetings and it has been reported that the firm's Pension Consultation Committee has written to IBM's UK Chief Executive saying that, "In the last 20 years we, as a group, have never seen such a reaction from our colleagues. Expressions of shock, anger and betrayal of trust are widespread."
Now Mike Hancock is demanding that IBM re-thinks the move and also that the Secretary of State for Work and Pensions intervenes with the company. The MP maintains that the firm can easily afford the pension, having made a profit in the second quarter of 2009 alone of $3,100 million worldwide and spent $4,800 million in the first half of the year on paying dividends and buying back shares to benefit shareholders. It has also in recent years taken pension contribution holidays.
Mike said: "This is a very profitable firm. Its employees in Hampshire and the UK over the past thirty years have contributed very significantly to making hundreds of millions of pounds for IBM's shareholders. The inescapable conclusion is that this is more about betraying the employment terms and conditions of its staff and profiteering by shareholders and senior executives. IBM's slogan used to be "Think", it should now stop, think and re-think this proposal and drop this daft, damaging and devastating change. I also want an urgent meeting with their Chief Executive to discuss what is happening here - and I hope that representatives from the trade unions, IBM pension scheme members, others of the region's MPs and indeed Government ministers will join me."
The trade union, Unite, says that the company cannot introduce such a change in Germany because of the legal framework there. Mike has also pointed out that the Government has awarded contracts worth many of hundreds of millions of pounds to IBM in recent years.
Mike added: "I hope that the Secretary of State for Work and Pensions shares my concern and she will now intervene and demanding that IBM drops this plan which is causing such anger and dismay among its employees. Not only does the Government give IBM hundreds of millions of pounds a year in the contracts it has won but it should also be angry at the way it is betraying a promise to its workforce to keep the scheme until 2014. I am also concerned that IBM is able to treat its UK employees considerably less well than their German counterparts and the Government and Secretary of State should look at plugging this legal loophole urgently."
Notes: There are details from Unite at http://unite.newsweaver.co.uk/jfuehg7upkxt8428j61093?email=true and http://www.unitetheunion.com/ibm
The Association of Members of IBM UK Pensions Plans (AMIPP) at http://www.amipp.org.uk/
Details of IBM's recent financial results is at: http://www.theregister.co.uk/2009/07/16/ibm_q2_2009_numbers/
Details of the letter, Jim Lamb, IBM Director, wrote to Sir Peter Lloyd, MP on 3rd October 2000 outlining that IBM were at the time taking a pensions contribution holiday is at http://www.amipp.org.uk/historical/jimlamb1.html
Details of the letter from IBM's Pensions Consultation Committee to its Chief Executive is at http://www.dailyecho.co.uk/news/4556007.Leaked_letter_reveals_fury_of_Hampshire_s_IBM_staff/
Mr Brendon Riley
Chief Executive
IBM (UK and Ireland)
Mail Point 1PG2
IBM South Bank
76, Upper Ground
LONDON SE1 0PZ
Dear Mr Riley
I am writing to you on behalf of several of my constituents who have written to me and who are employees of your company as I understand that you are proposing to make significant changes to their company pension which could see a very significant cut in their pension. This proposal will see the closing of the final salary based defined benefit pension plan. This is where someone's pension is linked to their final salary. I understand this plan has been closed to new entrants so will particularly affect those who have been employed for longer periods. I gather that the change could be implemented as soon as April 10th 2010 and could mean someone losing over a fifth of their pension. Many employees will therefore face the stark choice between trying to take early retirement, subject to company approval, before 2010 and so maintain their current pension benefits or else face a significant drop in their pension.
I understand under legislation that a company has to consult on such a change for sixty days which started in this case on 10th August. However there is a widespread feeling that IBM are doing what is necessary under the legislation and just going through the motions and don't really intend to negotiate with employees over this. Indeed it is perhaps not insignificant that this was announced in August during the peak summer holiday time.
There are a number of particularly worrying aspects to this. Firstly I understand that IBM gave reassurances as recently as 2006 that funding for this plan was in place until 2014. Secondly I understand that while the defined pension plan has been closed to new entrants in Germany (as in the UK), German legislation means that it cannot be closed for existing members. This means that if this change goes ahead IBM employees in this country and my constituents will be treated significantly less well than those in Germany and other countries. Finally we are talking by definition about employees who have worked for IBM for a long time - in quite a number of cases for over thirty or forty years - and therefore contributed very significantly to it making many hundreds of millions of pounds in this country alone in revenue and profits and therefore to the wealth and remuneration of senior executives in IBM including yourself. I note that the Unite union says that the Chief Executive of IBM Worldwide, Sam Palmisano is reported for example to have a total wealth in excess of $115m including a pension balance of over $40m. It is often the case, and I assume that it is for you and other senior executives within IBM UK and IBM Worldwide that they have significant share options and so are particularly interested in seeing rises in the share price and also are often members of a different pension scheme to that for other staff and are therefore unaffected by changes to the general pension scheme.
IBM is also in good financial health. I understand that IBM had increased net profits in the second quarter of 2009 of $3,100 million and that is for just three months of a year. I also understand that it spent $4,800 million in the first half of 2009 in paying dividends and buying back shares. It is difficult not to draw the conclusion that IBM is doing rather more to help its shareholders and senior executives than it is its employees who after all make the money for those shareholders in the first place.
A significant reason for IBM making that money was that it offered good terms and conditions and therefore attracted high calibre employees - the promise of a pension based on someone's final salary was a very significant part of this. IBM seems now to be reneging on this promise and that is a very serious matter.
It may be that IBM has a pension deficit at the moment. Part of this will obviously stem from depressed share prices in the current global current economic recession and it is likely that over time this will improve as the global economy returns to growth. It is also the case that IBM has from time to time taken pension contribution "holidays". I note for example that the IBM director, Jim Plumb wrote to Sir Peter Lloyd. MP on 3rd October 2000 saying that: "The IBM Pension Plan is currently in surplus and as is normal practice the scheme actuary has recommended that IBM may take a contributions "holiday", which it is taking." It seems that IBM and its shareholders are only too ready to take a holiday in good times and reduce pension benefits to its employees in bad.
The Daily Echo newspaper has reported that the firm's Pensions Consultation Committee has recently written to you saying: "In the last 20 years we, as a group, have never seen such a reaction from our colleagues. Expressions of shock, anger and betrayal of trust are widespread. IBM UK is in danger of using pension changes as a short term lever to improve the company's profits, while undermining the future financial security of many employees in the process and turning many of their life plans upside down."
This change therefore does seem, from advice within your own firm, to be very short sighted for the company itself. It will greatly damage IBM's reputation within the IT sector. Particularly as I understand that IBM has moved somewhat away from selling computer hardware to selling consultancy, software and IT services - all of which are more dependent on human resources and having very high calibre employees. It will have serious consequences for individuals - seeing a significant cut in their pension and a betrayal of the promise that they were given by the company. It will also I believe have serious consequences for this region of the country. Obviously IBM is a big employer in Hampshire and the South of England. There is a fear that many employees may take early retirement, if this is to go ahead, before the change so as to maintain a defined benefit pension. This will then have a significant effect on the economy in Hampshire and Portsmouth at a difficult time. It may also considerably weaken the IT sector in the region.
I would therefore be grateful for several things. Firstly I hope that you will take on board the very great concerns of your employees and not proceed with the change to the pension scheme. Secondly I would be grateful if you would consider meeting with me, other Members of Parliament for this region and I hope representatives from the Unite Union and from The Association of Members of IBM UK Pensions Plans and also I would hope from the Department of Work and Pensions. I look forward to receiving your reply as soon as possible.
Best wishes
MIKE HANCOCK CBE MP
CC: Secretary of State for Work and Pensions
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