Fears over IBM winding up final salary-based pension scheme |
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Published
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Thu, 26 Jan 2006 09:10
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LONDON: U.S. computer giant IBM is contemplating withdrawing the final-salary based pension scheme for its British employees, according to unconfirmed reports. The company's general manager of U.K. operations has convened a meeting of line managers Thursday where he is expected to convey the decision on new pension plans.
IBM has nearly 4.3-billion-pound pension deficit and it has already decided to end the defined benefit pension scheme for its 125,000 U.S. workers from 2008. It is now planning to extend the decision to its employees in Britain.
The unions are worried that given IBM's standing as a leader among IT companies, such a decision will be a dangerous precedent and will have adverse implications. Peter Skyte, national officer for the IT sector at Amicus, the manufacturing, technical and skilled workers' union, fears that the decision would create a chain reaction in the IT sector and beyond.
It is estimated that nearly one-third of IBM's 20,000 staff in the U.K. are covered under the company’s final salary-based pension scheme, though the company had closed it to new members of staff.
IBM had taken several measures to reduce the deficit in its pension fund. Last year, it forced employees to increase their contributions to the scheme to 6 per cent of their salary from 4 per cent.
The company had a record of disputes with its employees and retirees over pension. The pensions ombudsman had investigated complaints of workers but had rejected the complaints.
Analysts said IBM may be following the trend in the corporate sector as regards pension funds are concerned. Many firms, facing unprecedented deficits in their pension funds, have closed down their final salary-based schemes and instead started offering schemes like career-averaged based schemes.
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