IBM to freeze US pension scheme

All IBM staff in the USA will be offered personal pensions

The giant computer firm IBM is closing its US final-salary pension scheme to existing members and giving them personal pensions instead.

The company said the change, from January 2008, would give it more control of its pension costs.

In conjunction with similar changes being considered for staff in other countries, IBM will save around half a billion dollars a year.

The IBM pension scheme has assets worth $48bn and is fully funded.

Randy MacDonald, a senior IBM personnel officer, said: "We're taking these actions to better control retirement plan expenses, position the company for business growth and competitive strength and preserve employees' earned retirement benefits.

"We also believe these are prudent and balanced steps at a time of uncertainty and conflicting legislative and regulatory directions about defined benefit retirement plans in the USA" he added.

The company stressed that the change would not affect its 125,000 pensioners in the USA, workers who have left the company or those who retire before January 2008.

After that date the company will lock in all accrued pension benefits - but freeze all further contributions and accruals to the scheme.

It will then open personal pension plans, known as 401(k) plans, for all staff and make contributions worth up to 10% of staff salaries each year.

IBM closed its final-salary scheme to new entrants at the start of 2005.

Reflecting a widespread trend in US industry, a similar policy is being adopted by the computer firm Hewlett-Packard this year.