Oral Answers to Questions

Debate between Kirsty Blackman and Philippa Whitford

Wednesday 27th March 2019 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

6. What recent discussions he has had with the Scottish Government on the UK leaving the EU.

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

8. What recent discussions he has had with the Scottish Government on the UK leaving the EU.

Digital Equipment Ltd: Pension Scheme

Debate between Kirsty Blackman and Philippa Whitford

Tuesday 17th January 2017 Westminster Hall

[Kirsty Blackman (Aberdeen North) (SNP)]

Thank you, Mr McCabe. It is a pleasure to serve under your chairmanship.

I commend my hon. Friend the Member for Ayr, Carrick and Cumnock (Corri Wilson) for securing this important debate, and the HP Pension Association for its work and all it has done to highlight the issue, particularly the indexation of pre-1997 defined-benefit schemes. I am here on behalf of my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford), our pensions spokesperson, who unfortunately is in the Chamber and unable to attend. Hon. Members will have to forgive me if I do a bit more reading normal.

On defined-benefit and defined-contribution schemes, my hon. Friend the Member for Central Ayrshire (Dr Whitford) covered the issue of trust nicely. If we expect members of the public to be opted into those schemes, they should expect a reasonable return, and they should have trust that their pension scheme will pay out what it said it would. That is particularly true of young people coming into schemes, with the possibility that the state pension may not kick in at 65 or 67 in the future—it may be 70 by the time I get there. We do not know what the state pension age will be at that stage. We need to ensure that people pay into private pensions, so we need to keep up the level of trust in private pension schemes, which has been eroded in recent years.

The UK Government recognise that it is important that the state pension keeps up with inflation. That is why they have committed to the triple lock, and there has been support for that from throughout the House. However, it is not right that we have that for the state pension, but elsewhere there is effectively, if not an ability to dodge that, then almost a loophole. There is a gap, with a lack of legislation committing organisations to sticking to that, particularly in relation to the pre-1997 situation.

Inflation is important. If a pension scheme is not keeping up with inflation, things are less affordable, so pensioners cannot support their retirement in the ways they expected. It is therefore key that the term “inflation” is used, and that we look at that rather than at a certain defined percentage increase.

On the pre-1997 rights and the estimated 3,500 pensioners in the HP pension scheme, as has been said already, according to the HP Pension Association the buying power of their pensions has diminished by almost 50%. That has cost each pensioner an average of £24,000 in cost of living increases compared with those whose contributions were made post-1997.

The HP Pension Association estimates that the average pension paid to Digital pensioners in 2002 was £6,008 per year. If that had kept up with inflation it would now be £9,070 per year—a difference of £3,000 per annum. That is a significant amount of money that people do not have to spend, and it means that people do not have the retirement that they expected. If Brexit causes a period of rising inflation—the current situation has happened over a period of relatively low inflation—the problem will be compounded even further, and it will be even more difficult for people to survive and have the quality of life they expected from their pensions.

Data from the Office for National Statistics occupational pension schemes survey showed that 5.2 million pensioners were in receipt of pensions with pre-1997 rights, of whom 400,000 were not receiving inflationary increases. Some 40% of those with pre-1997 accrued rights received increases of 2% or more, which was down from 85% a year earlier. There has been a significant change, possibly because companies are seeing that they do not have to pay extra. I therefore think it would be sensible for the Government to consider looking at the issue. I understand that there is going to be a Green Paper, in which I hope the Government will touch on it.

[Dr Philippa Whitford]

Does my hon. Friend agree that it is also outrageous that Hewlett Packard pays cost of living rises to its pensioners in Europe but not those here? That shows that this is totally related to the loophole in the UK guidance.

[Kirsty Blackman]

That is a real discrepancy, and it shows that those payments are affordable. Hewlett Packard can afford to pay the increases if it is doing so in other places. The UK Government have a responsibility to consider that and see what changes they can make.

We are all aware of the widely reported challenges that defined-benefit schemes are facing, including from increased life expectancy—companies did not expect to have to pay out such amounts of money for such a long period of time—and the impact of declining yields, while the increase in many schemes’ deficits has been highlighted in the past. The UK Government and Parliament have discussed changes to the rules that govern those pension schemes and to uplifts, but we do not want a situation in which we are putting the schemes before the people. We need people’s rights to be protected and the schemes to continue to be affordable. It is important that we take the pensioners into account first.

My hon. Friend the Member for Ross, Skye and Lochaber tells me that the Government’s Green Paper will offer an opportunity to examine this issue. He asked me, on behalf of the Scottish National party, to commit to working constructively with the Minister, to see whether we could find an affordable way to offer protection to those with pensions with pre-1997 rights. We are keen to have that constructive conversation, and my hon. Friend, who is our pensions spokesperson, would be keen to go ahead on that basis.

As has been said, in the case of the Digital pensioners we are talking about the difference between pre-1997 and post-1997 contributions. The Government could specifically consider that in their Green Paper. Many recent debates have focused on reducing the statutory minimum contribution requirements, and as I have said, we need to make sure that do not further erode those requirements and that we put pensioners first.

This is the kind of issue that ought to be looked at by a pensions and savings commission. The SNP has called for that before and will continue to do so, because this issue will not go away. Pensions will be ever-increasing in importance, as both inflation and life expectancy increase and as possible future changes to the state pension come through. It is now time for a pensions and savings commission to go ahead. That would benefit not only the pensioners in the Digital scheme but pensioners in all schemes and in no scheme. I appreciate the Minister taking the time to listen to the debate, and I again thank my hon. Friend the Member for Ayr, Carrick and Cumnock for bringing the debate to the House.