IBM to cancel final salary pensions

IBM is set to close its final salary pension plan, affecting around 5,600 staff.

The move follows a similar step taken by Fujitsu in May, after that company's scheme hit a £1 billion deficit.

IBM said the move was needed to “maintain competitiveness”. In the coming weeks it will consult with staff on the changes.

In May, IBM said it was cutting staff in the US. The Wall Street Journal reported 4,000 jobs would be offshored to India, but IBM did not confirm the figure.

Under the UK plans, IBM staff in the final salary scheme will receive what has been "accrued" so far, based on years of service and level of pay. Then they will also be able to move into defined contribution plans, more risky investment funds for staff that can pay out at retirement.

An IBM spokesperson said the company was also proposing “enhancements” to the defined contribution plan, but declined to give further details. But the plan is potentially more risky for staff because it involves investment funds and there is no guarantee over the level of the final payout.

Brendon Riley, UK & Ireland general manager at IBM, last night sent an email to employees informing them of the changes.

He wrote that “the rapidly-rising costs and liabilities associated with the provision of defined benefit pensions is placing pressure on our long-term ability to invest for future growth and operate in an intensely competitive global market”.

Union Unite reacted angrily to the news. It said that "IBM can well afford to keep the existing scheme open but is seeking to cut costs in order to make more money available for dividends, to buy back IBM shares and for acquisitions".

Unite said its members at Fujitsu were also considering industrial action following the news of the pension cut there.