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Stephen Pound (Ealing, North) (Lab): On the subject of chief executives, Sam Palmisano, the chief executive of IBM in America has just seen his pension increase by $20 million to $40 million. Does the hon. Lady not find that difficult to justify?
Ms Katy Clark (North Ayrshire and Arran) (Lab): I hope that the hon. Lady understands that the number of interventions shows the anger in the country on the issue and from IBM employees. Does she agree with me that IBM's treatment of its employees is severely affecting its reputation?
Mr. Jim Cunningham (Coventry, South) (Lab): There is something more fundamental to the matter-I declare an interest, as I know someone who works for IBM-because many such pension schemes, when we look at their origins, are subject to wage negotiations, and it is the over-50s in particular who will be hard hurt by that. For example, sometimes pensions were negotiated to offset a wage increase and additional holidays. The concern is far more fundamental, and if there was ever a group of people entitled to get their full pension without changes, it is that group of workers.
Mark Hunter (Cheadle) (LD): On that point, it is not just the over-50s who are affected. Several people in my constituency are affected, and I would like to quote briefly from an e-mail I received from one gentleman:
"As I will not be 50 by next April, I have no option to take early retirement now and avoid the worst impact of these changes from April 2011. My biggest concerns are therefore that...IBM is not only closing its Direct Benefit pension plan, as are many other UK companies, it is also taking the more dramatic step of massively increasing the penalties for early retirement",
"This will have a devastating impact on my future pension",
Sandra Gidley: Yes, I do. In some respects, the fact that IBM has so many employees who have stayed with it loyally is testimony to the sort of employer it had been. Those employees have now reached their 50s and do not feel that they have been treated well after the time, investment and professionalism they have devoted to the company.
Jeremy Wright (Rugby and Kenilworth) (Con): I am grateful to the hon. Lady for her generosity in giving way so often. She will know that the pension trustee is taking IBM to court over that. Would it not be more sensible for the company to hold back on the changes until the legal challenge has been determined?
Mrs. Maria Miller (Basingstoke) (Con): I reiterate my support for the hon. Lady's comments, particularly on behalf of my constituents who are working for IBM, particularly those who are older, who feel that they have effectively been forced into redundancy by the measures being taken. Does she share my concerns that IBM is unwilling to discuss the details of those constituents' concerns with their local Members of Parliament?
Sandra Gidley: It is very difficult. Some of us had a meeting with IBM, but it was not an easy meeting to obtain and the company was not terribly open. What is almost worse is that its members of staff are gagged from saying anything in the press, so they feel that opportunities to highlight the way they have been treated by IBM, such as this debate, are very useful.
Robert Key (Salisbury) (Con): I am grateful to the hon. Lady, whose constituency neighbours my own-like her, I have many constituents who work for IBM. I share my constituents' anger about that, but I am also very sad. Is she sad that a great company like IBM should have sunk to this? Today I went to its website to check out what it really feels about life by going to the sections "Our values" and "Corporate Social Responsibility". I tried to open the "IBM Corporate Responsibility Report", but it brought up the following message:
"Our apologies...The page you requested cannot be displayed".
"we feel that the system has let us down, badly. This is our Robert Maxwell moment. We have saved in our pensions for many years, in the belief that our old age would be one to which we could look forward. IBM seems to have the right to rip up a longstanding contract, without redress, and leave our future plans in tatters. IBM is robbing us just as Robert Maxwell robbed his pensioners."
I would like to devote some time to the early retirement discount factors, because that is the issue that has generated the most anger. In effect, it is widely regarded as a means of forcing employees to retire early, with the added bonus that IBM escapes having to put together redundancy packages. I have been sent an e-mail that highlights why the employees feel that they have no choice in the matter. It is from a 53-year-old who had originally planned to retire in two years at the age of 55. If he takes the option to go now, his pension will be reduced by 21 per cent., which is more than it would have been reduced by, but that is the situation. If he waits to retire at 55, as he had planned to do, his pension will be reduced by a massive 48 per cent. Given that the employees stand to take such a large hit, many of them feel that they have no option but to cut their losses and leave. As I mentioned, 800 employees are leaving.
The only change to IBM's original proposals is that, even though the majority of employees will leave by the end of the first quarter of 2010, the company has added a little flexibility to phase the leave over a further one month period. Clearly, that is only in the company's interests, not those of the workers.
Mr. John Redwood (Wokingham) (Con): In the hon. Lady's conversations with IBM, has it produced any reason why it needs to do that, other than saving money, because it seems very oppressive conduct from the point of view of my constituents and hers?
Sandra Gidley: As far as I am aware, it has not given any good reasons, but cited the long-term prosperity of the company. It claims that Britain is poorly performing, compared to other countries, but the company hit all its targets here for making profits, so that is something of a surprise.
Interestingly, the company retains the flexibility to offer a more attractive discount rate. IBM would say that that is so that it can make early retirement decisions on compassionate grounds, but many of the workers have expressed the view that that flexibility could also be used, perhaps in a few years' time, to get rid of another tranche of the company's most loyal and experienced workers. Many of them have expressed regret that the company does not appear to value their lifetime commitment and feel that they should be entitled to a proper redundancy package if the company wants to get rid of them.
The scheme is really rather clever, and there are concerns that other companies might look at how IBM has managed to handle a large number of job losses and that the manipulation of the early retirement discount factors might become a commonplace mechanism for avoiding redundancy payouts. If the Government are serious about workers' rights, I urge the Minister to investigate that aspect of the problem and take steps to ensure that manipulation of pension scheme terms is not used by companies as a way of avoiding redundancy payouts.
The company would claim that it has made some concessions as a result of the consultation, but in reality those are minor when compared to the scale of the changes overall and have no significant impact for employees aged 50 or over.
Unfortunately, it is fairly common to see final salary schemes end. In many cases they are unsustainable in the long term, but a principle of fairness would suggest that employees should be given an opportunity to minimise the impact of any changes. The closer one is to retirement, the more important that is. The manipulation of the early retirement discount factors in no way passes that fairness test. As I have already pointed out, those who are planning to retire in as little as two years' time have been forced into going now to reduce their financial losses. They have simply had no opportunity to try to make good the difference or to phase in to their retirement in a more acceptable way financially.
I have also become aware of another practice that one would not usually expect of a world-class employer: people have been offered pay rises, but only on the condition that they agreed that the pay rise would not be pensionable for the purposes of the defined benefits scheme. If employees disagreed with that condition, they did not receive the pay rise. There are also concerns about manipulation of the performance management system, but I must stick to pensions for the purposes of the debate.
It is not just workers and local MPs who are concerned by the way IBM has manipulated its pensions system. The pension trustee has referred the matter to the
courts and IBM has refused to delay implementation of its plans until the outcome of any court case is known. In the light of the pending court case, the Minister may like to respond in principle to the following questions.
It is clear from this case that there is a lack of clarity about the financial implications of the scheme and the factors that have prompted the company to renege on its 2006 promise. Is there not a case for more detailed financial modelling being made available to workers so that changes to such schemes are fully justified and fully understood? Should there not be a principle of no sudden changes, so that when changes to pension plans are necessary, those who are affected have time to take measures to minimise personal financial loss?
Will the Minister look at the manipulation of the early retirement discount factors and reassure herself that they are not being used as a means of avoiding redundancy payments? Will she also examine whether there is an age discrimination aspect to the manipulation of them? It is strange that the company seems to want to get rid of so many of its most skilled workers. Will she consider legislating so that workers are protected from the impact of such sudden changes?
I have received e-mails from IBM employees from all round the country as a result of calling for this debate. Almost without exception, they feel let down by the company to which they have devoted the best years of their life, and they feel that the Government offer them no protection against what they see as bully-boy tactics.
The Minister for Pensions and the Ageing Society (Angela Eagle): I congratulate the hon. Member for Romsey (Sandra Gidley) on securing this debate. It is clear from the attendance in this Chamber what anxiety and outrage the decisions have caused for right hon. and hon. Members throughout the country, as IBM is a large employer. Many colleagues from both sides of the House are here today precisely to express their worries about what IBM has chosen to do and to pass on the feelings of the constituents whom they represent. Even in this short debate, the outrage and sense of injustice have certainly been communicated.
As the Pensions Minister, I have received several letters about the proposed changes to IBM's pension scheme, so I know that the issue has caused upset, outrage and worry up and down the country. It is always disappointing when an organisation such as IBM decides to close its final salary pension scheme to future accruals. Of course, this remains a matter for IBM to work through with the trustees and employee members of the scheme. It would be inappropriate for me to comment in detail on the case, especially as, as the hon. Member for Romsey pointed out, the trustees are currently going before the court to seek clarification, if I may put it that way, on some aspects, particularly those of early redundancy rights and how they impact on the scheme.
I am not directly privy to the company's specific proposals, and I would not expect to be, but I note that IBM US appears to be pursuing a similar policy. Only IBM can comment on its motivation for making the changes, and I am certainly not about to try to answer for it.
However, I sympathise with the IBM pension scheme members. I understand the anxieties that arise for members when such events occur. As has been hinted at by all hon. Members who have made contributions, however short, to this debate, and particularly by the hon. Member for Romsey, some employees' future financial situations have suddenly changed quite dramatically, and it is clear that they now face difficult choices that they had not anticipated having to face.
The changes that IBM has made to its pension scheme are disappointing but they are for it to defend-I certainly shall not try to do so. I only hope that the IBM board is watching this debate and taking note of the reaction that its decisions have provoked, albeit they have not been expressed directly but indirectly through those in this place who represent the views of constituents.
This Government believe that all workers should have access to workplace pension saving, which is why we continue to make good progress with our plans to introduce automatic enrolment from 2012. Hon. Members may wish to note that the Government published a suite of 10 sets of draft regulations and orders which combine to help deliver pension reform and the national employment savings trust-formerly known as personal accounts-which will be the new low-cost, simple pension scheme for employers to use.
For decades, employers have been moving away from defined benefit to defined contribution schemes. Membership of defined benefit schemes peaked in the 1960s, when I was still at school, and has been in decline ever since, so this is not a new phenomenon.
Angela Eagle: In a minute, when I have finished this observation. I do not believe that there is a magic bullet or any one Government action on its own that will reverse the trend, but that does not mean that I am not open to considering suggestions that will help.
Chris Huhne: What is clear from what is happening is how the company is using the pension scheme to encourage people to leave early. In effect, it is loading the costs of what would normally be picked up in a voluntary redundancy scheme on to the pension fund. Does the Minister agree that that shows that the legislative framework is not adequate to protect people in pension schemes from such behaviour, and what does she intend to do about it?
I hope that the hon. Gentleman does not think that I am condoning what IBM is doing. I am making a general observation in this area. It is often more of a company human resources issue than a pension scheme issue. If he wants to give me details that he thinks make his case, I will be happy to look at whether there are public policy implications, but it is important to realise that there has to be some flexibility, and that not all flexibility is written into the rules of pension schemes. Quite often, it is available as long as there are surpluses in the scheme that can be used for such purposes.
In the past, many employers and employees have benefited from the flexibility that that kind of procedure has offered, if downsizing happens to be the case. We must be careful not to react with understandable emotion to what has happened and end up throwing out the baby with the bath water in terms of flexibility. However, as I said, I am happy to have a look at things that the hon. Gentleman thinks impact directly on this area.
"IBM has used these changes to force current employees over 50 into a 'Hobson's Choice' of either taking early retirement now or risking the massively worse impact of early retirement penalties in the future. This is really 'redundancy by stealth'"?
Angela Eagle: Only IBM can comment on its motivation for making the changes. I sympathise with IBM employees who find themselves in this situation. Indeed, the hon. Member for Romsey-I want to address some of her points because, after all, this is her debate-asked whether age discrimination is involved. My only observation on that is that it depends on the exact circumstances, and the way to test whether there is age discrimination is through industrial tribunals. It is a bit difficult to make more than that general observation on the proceedings, but some members of the IBM pension scheme or, indeed, their trade union may wish to think about resorting to industrial tribunals to test whether age discrimination is an issue.
Mr. Jim Cunningham: Coming back to a point that was made earlier, I would have thought that the Minister could look at the principle of redundancies being funded out of pension schemes. That is something that should have been addressed a long time ago, and I know that there is a great deal of anger in the trade union movement about it. I know that we have to have flexibility and so on, but the Minister could at least say that she will look at that element.
Angela Eagle: One of the jobs of a Pensions Minister is to look and see how things are developing out there and always to check whether, in the circumstances, our rules and regulations are fit for purpose with respect to developing practice. I am more than happy to do that and I always have an open mind about such things.
David Cairns: My hon. Friend says that she is not in a position to speculate on IBM's reasons and she is right about that. However, when some of us met IBM we were told that this change was made because of the comparatively poor performance of IBM UK and Ireland. Yet in his final missive to workers issued yesterday, Brendan Riley said that it had been a privilege to lead one of the best performing parts of IBM UK. So there is a clear inconsistency in the message that IBM is sending out: either it is a poor performer or it is a good performer.
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