HPE pensioners to bring inflation-proofing dispute before MPs

Around 100,000 members across the UK are thought to have seen their defined benefit pensions slowly eroded by inflation.

The Office for National Statistics announced this week that the consumer price index hit a five-year high in the year to September, with the cost of living outpacing a fixed pension by 3 per cent.

According to a campaign group, 3,500 pensioners of the Digital Equipment Company pension plan, now a section of the Hewlett Packard Retirement Benefits Plan, have each lost an average of around £24,000 in real terms.

The Hewlett Packard Pensioners Association will present its concerns to up to 150 MPs at the Houses of Parliament on Thursday, at an event hosted by Hugo Swire, Conservative MP for East Devon.

The fact remains that some of the people that have been hit most by this are the people with the lowest incomes

Alex Cunningham, MP Stockton North

Sponsoring employers were not required to uprate their pension promises in line with inflation until the passing of legislation in 1997.

Many employers chose to do so anyway, but employers such as HPE have only granted infrequent discretionary increases.

Progress has been slow

In February this year, then-pensions minister Richard Harrington revealed he had met with several such companies in an attempt to “nudge” them into providing a solution to the problem, but the HPPA says it is yet to see any action from its employer.

“HPE met with the pensions minister earlier this year and they just stonewalled it,” said Steve Spillane of the HPPA. His organisation contends that the scheme sponsor created an expectation of cost-of-living increases when members signed up to the scheme.

A spokesperson for HPE said: “As with any concern raised by our pensioner population, HPE believes it continues to give this matter due and appropriate consideration. These decisions are reached after careful consideration of a number of factors.”

Harrington also asked to meet with CEO’s of companies including technology company 3M, listed as a World’s Most Ethical Company three years in a row. 3M was unavailable to comment, but Pensions Expert understands the meeting was repeatedly postponed.

Politicians back pensioners

A 2014 pensions ombudsman referral found HPE had acted within its legal rights in not granting increases, and that no remedies were required.

However, political support appears to be growing for legislative change to address the issue, after a Westminster Hall debate instigated by the Scottish National Party in January.

“As prices around us continue to rise and workers face the worst decade of wage growth in 210 years, safeguarding the welfare and financial security of pensioners is imperative,” said Mhairi Black, MP for Paisley and Renfrewshire South and member of the Work and Pensions Committee.

“We do not believe it is appropriate that some pension pots are able to dodge the matter of inflation; a situation illustrated by the pre-1997 situation,” she added.

Stockton North MP and Labour pensions spokesperson Alex Cunningham agreed that a solution must be found. He pointed to the fact that companies like HPE offer inflation-proofing to pensioners in Europe.

“Companies ought to be consistent in their treatment of pensioners… across their whole workforce,” he said.

Cunningham said he hoped the Department for Work and Pensions’ forthcoming DB white paper would provide a solution to the current impasse, where companies are not legally obliged to act and retrospective legislation is deemed to be unfair on them.

“The fact remains that some of the people that have been hit most by this are the people with the lowest incomes,” said Cunningham.

When is retrospective not retrospective?

The HPPA has maintained it is not seeking retrospective legislation, as it only wants uprating to take effect from today. This would lessen the financial burden on sponsors compared with a backdated bill.

Spillane also sought to dispel misconceptions that the pensioners are seeking retail price index increases: “We’ll adopt whatever measure the government chooses.”

However, their proposal for legislation may still count as retrospective for legal purposes, according to Anna Rogers, senior partner at Arc Pensions Law.

“It’s still saying that a pension that was earned before 1997 should now carry increases,” she said, questioning the possibility of passing such a law.

“There’s a retrospective element to it, even if it’s only relevant to future payments.”

This article has been updated since original publication