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IBM Pension Threat After US Scheme Closure

Posted on: Friday, 6 January 2006, 15:00 CST

By Evening Standard, London

Jan. 6--Some 20,000 British workers at IBM are facing the closure of their gold-plated pension schemes.

If IBM UK, one of Britain's largest private-sector employers, follows its US parent in closing the final-salary scheme, it will be one of the biggest blows in the escalating attack by blue-chip companies on workers' retirement benefits.

Creaking under the weight of a $7.4 billion (£4.2 billion) pension deficit, the computing giant, headed by Sam Palmisano, has said it will stop contributing to its defined-benefit final-salary retirement schemes for US workers.

Employees will be moved on to potentially poorer-paying "money purchase" schemes, where retirement funds are based on the vagaries of investment performance rather than length of company service and pay levels.

It appears likely IBM UK will follow suit.

A spokesman for the company, which has a big presence in London and the South, admitted: "Changes are under consideration worldwide and in the UK."

IBM UK is understood to run several schemes with attractive perks, which almost all of its 20,000 workers are likely to have signed up to.

Across the country, British workers are facing an onslaught on their retirement plans. Rentokil Initial recently became the first FTSE 100 company to ditch its final-salary scheme. This week, the Co-op and Philip Green's Topshop retailing group Arcadia announced their employees -- many already low-paid -- would have to work longer and pay in more if they wanted to retain full benefits.

The Arcadia decision, in light of the £1.2 billion dividend that Green paid himself and his family, could fall foul of new pensions regulations, lawyers Wedlake Bell warned today.

It says the pension regulator has the power to hold companies and their investors liable for future scheme deficits should a shareholder payout be shown to have been made at the expense of pensioners' funds.

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Copyright (c) 2006, Evening Standard, London

Distributed by Knight Ridder/Tribune Business News.

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IBM, 6680, RTOKY, RTO,

Source: Evening Standard

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