Allan Dorans
Main Page: Allan Dorans (Scottish National Party - Ayr, Carrick and Cumnock)Department Debates - View all Allan Dorans's debates with the Department for Work and Pensions
(3 months, 3 weeks ago)
Commons ChamberI thank the right hon. Member for Orkney and Shetland (Mr Carmichael) and the Chair of the Work and Pensions Committee, the right hon. Member for East Ham (Sir Stephen Timms), for their work in bringing this important matter to the House.
The right hon. Member for Orkney and Shetland mentioned pension schemes including those of Shell and BP, but I want to focus on the Hewlett Packard Enterprise pension scheme, and a decision that directly affects more than 1,500 people living in my constituency and in neighbouring constituencies. I speak on behalf of my constituent Patricia Kennedy, as well as 9,625 members of the Hewlett Packard Enterprise UK pension scheme, which includes more than 4,000 members of the Hewlett Packard Pension Association. These are people with an average of 20 years’ loyal service, the bulk of it pre-1997. They were promised a good pension. They expected a “fair deal” from a world-leading corporation that they helped to build, but now find themselves left with a “raw deal”. In general, their pensions now have less than 70% of the expected buying power.
In 1977, Digital Equipment Corporation of Massachusetts opened a factory in Ayr. The company, known locally as Digital, was a major boost to the local economy, and, indeed, apart from the Government, was one of the largest employers in Scotland, with a major production facility on the outskirts of Ayr. At the time, the Digital pension scheme was regarded as one of the best in the United Kingdom. Annual increases were discretionary, but pensions more than kept pace with the best available.
In 1998 Digital Equipment merged with Compaq, and in 2001 that organisation, in turn, merged with Hewlett Packard. In 2017 Hewlett Packard split, and Hewlett Packard Enterprise took over responsibility for the Digital pension scheme. Employees of Digital, Compaq and Hewlett Packard joined and paid into the pension scheme in the reasonable expectation that future pension benefits, which would have provided them with a reasonable pension on retirement, would continue to increase in line with the cost of living. Sadly, however, that has not happened. Since Hewlett Packard Enterprise took over the pension scheme there have been only three discretionary increases, of 1% in 2004, 1% in 2008, and 3% in 2022.
Hewlett Packard Enterprise, while presenting itself to its customers and investors as the most ethical company in the world, is taking advantage of the weakness in the UK pension legislation relating to pre-1997 service. That has resulted in a “raw deal” average pension of £9,700, which, even when topped up with the maximum state pension, results in “low income living” as defined by the Government. Regardless of its legality, this practice is heartless, immoral and unethical, and it is absolutely unacceptable from a major global corporation.
By contrast, Hewlett Packard Enterprise has had an global annual net revenue—a profit—of between $50 billion and $120 billion since 2002, totalling around $1.5 trillion. In 2023, Hewlett Packard’s chief executive was paid $1.3 million, a bonus of almost $2 million and $15.7 million in stock options. Shareholders got $1 billion in dividends that year.
If other, far less profitable companies can pay increases to their pensioners, surely Hewlett Packard can as well. We might ask why it does not. The answer is simply that it does not have to. In fact, it does not even have to explain how it comes to the decision that it makes each year. The decision-making process, what factors are considered and how pensioners’ needs are represented all lack transparency, and there is nothing that compels the company to change that. It has made its point for years, and there is a deadlock.
I am a realist. Although I call on the UK Government to put pressure on a US-headquartered corporation, that is unlikely to break the deadlock. However, there is a way forward. On Wednesday 18 October 2023, David Carson, a representative of the Hewlett Packard Pension Association, gave oral evidence to the Work and Pensions Committee on the defined benefits pension schemes inquiry, as was mentioned by the Chair of the Committee. The Hewlett Packard Pension Association also made three written submissions, which feature in the Committee’s final report. The Committee mentioned these oral and written submissions in paragraph 83 of the report, and paragraph 9 of the conclusions. It commented:
“Some pension scheme members are dependent on discretionary increases to ensure their pension payments keep up with the cost of living. Where these have not been awarded the effect has been, over time, to erode their standard of living. This can be particularly the case for those with rights built up before April 1997, when there was no general requirement to index-link pensions in payment.”
The Pensions Regulator should undertake research to find out: how many schemes have provision for discretionary increases on pre-1997 benefits included in their rules; whether the discretion is for the trustees, sponsoring employers or both; the number of years in which schemes have paid discretionary increases on pre-1997 rights; and the number of years in which they have not done so, as well as the reasons for that. As a matter of urgency, I strongly encourage the Pensions Minister, the Government and the Pensions Regulator to complete the research, which I believe will make it undeniably clear that an ethical code of conduct is required to ensure collaboration between companies and trustees on developing policy and strategy for pre-1997 discretionary increases.
Clarification is also needed from the Government on section 221A of the Pensions Act 2004. That section was inserted by paragraph (2) of schedule 10 to the Pension Schemes Act 2021, which states:
“The trustees or managers must determine, and from time to time review and if necessary revise, a strategy for ensuring that pensions and other benefits under the scheme can be provided over the longer term.”
That could be central to breaking the deadlock. If discretionary increases are viewed in the same way as other benefits in a pension scheme, it follows that companies and trustees must work together to devise a strategy for ensuring that pensions and other benefits under a scheme can be provided over the longer term.
We also need the research to be done by the DWP and the Pensions Regulator, a code of ethical conduct to be developed, and clarification from the Government that the intent of the Pension Schemes Act 2021 is that companies and trustees must work together to devise a strategy for ensuring that pensions and other benefits under a scheme, which include discretionary increases, can be provided over the longer term. I appreciate that the Minister may not be able to provide clarification on these matters today, but I would be grateful for a written response in due course.
Finally, although this debate focuses on private pensions, no debate on pensions would be complete without mentioning the greatest ever pension injustice—the 3.8 million WASPI women, including 6,800 in my constituency, who were not informed by successive Governments of changes to the age at which the state pension would be payable. The Government have ignored the plight of these women for nine years.
The Government hoped that the WASPI women would go away, but they have not, although 40,000 are unfortunately dying each year without getting any form of compensation. Some 240,000 have already tragically passed away, including my constituents Margaret Meikle and Morag Syne. The Government must urgently support and progress the private Member’s Bill tabled by my constituency neighbour, my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown). The Bill had its First Reading earlier this year, and it would require the Secretary of State to publish proposals for a compensation scheme for women born between 6 April 1950 and 5 April 1960 inclusive who have been adversely affected by the increase to the state pension age.