Digital Equipment Ltd: Pension Scheme

Peter Bottomley Excerpts

Tuesday 17th January 2017 Westminster Hall

[Corri Wilson]

The right hon. Lady makes a valid point that campaigners are not asking for indexation to be backdated, which would cause considerable difficulties for the companies involved. I will come to that point later.

I empathise with Hewlett Packard and other businesses that inherited defined-benefit schemes through expanding their operations during the boom years. They are all experiencing a global turnaround and an extremely challenging marketplace. Difficult decisions have to be made, and looking after the former employees of businesses that have long since been subsumed has to be balanced with current business concerns and the welfare of current workforces. Hewlett Packard is breaking no laws, and I understand that it fully appreciates the impact of its decision on its pensioner population and that is taken into account during annual reviews. However, I have greater sympathy for the concerns of the pensioners who have pensions with HP that will be frozen due to not being covered by legislation, and I would like the UK Government to take action to address the problems with defined-benefit schemes.

The Hewlett Packard Pension Association claims that withheld cost of living increases have so far cost pensioners an average of £24,000 compared with their colleagues whose contributions were made post-1997. That has led to severe financial hardship for many of those pensioners and has resulted in them being unable to afford an ordinary living pattern, being on the verge of poverty and requiring Government subsidies in the form of income support benefits.

[Sir Peter Bottomley (Worthing West) (Con)]

I speak because one of my constituents has been in contact with me. I have explained that I cannot stay for the whole debate. Is the hon. Lady essentially saying that it is the older, poorer pensioners who do not get increases, and the younger ones, who earn more, who do?

[Corri Wilson]

I thank the hon. Gentleman for his intervention. The people who have paid in for the longest are getting the least benefit back from the scheme, although I recognise that pension schemes have changed.

I would like to hear from the Government what options, if any, are open to scheme members. The Pensions Minister has stated that defined-benefit schemes will be looked at early this year and he intends to consider what the Government can do to tweak the environment of those schemes. Is indexation increases for all defined-benefit pension schemes one of the tweaks that he will look at? The change that HPPA is seeking is for the discrimination between pre-1997 and post-1997 contributions to be removed from legislation, and the minimum permissible increases for all defined-benefit pensions in payment in future to be indexed in line with increases in the retail prices index. Will the Government look at that in their forthcoming Green Paper?

The Scottish National party is committed to ensuring dignity in retirement for all pensioners in Scotland, and although many recent debates have focused on reducing the statutory minimum requirements rather than increasing them, it is important that we examine closely what will bring about fairness and sustainability and deliver that dignity. Those are the issues I want to address in opening the debate. I know that other hon. Members wish to participate, so I will draw to a close by appealing to the Minister to take into account the situation that, as we heard earlier, people—not just Digital pensioners—find themselves in.

Pension plans are made over decades. They are long-term investments in our future to ensure that we can survive when we are no longer working and to ensure that we are not a burden on the state or our families. However, it appears that plans that seemed sound at the time have turned out to be considerably less appealing 20, 30 or 40 years later. Too often, people pay into pension pots—whether private company pensions or indeed state pensions—all their lives but find that, when they retire, the goalposts have been moved. To paraphrase our national bard, the best laid schemes have indeed gang a-gley. I look to the Government and the forthcoming Green Paper to start addressing some of those issues on behalf of my constituents, and so that future generations can plan for their retirement.

--- Later in debate ---

[Sir Peter Bottomley (Worthing West) (Con)]

I apologise in advance: I will not be here at the end because I will be in a meeting with Equitable Life, which was just mentioned by the hon. Member for Central Ayrshire (Dr Whitford). May I make one positive suggestion, almost as an intervention, open to those pension funds, trade union funds and insurance companies that hold our money and own Hewlett Packard shares? They should ask HP whether it thinks it is socially responsible to discriminate between the different groups of UK employees it has taken over by acquisition. It seems that it should be asked to say to its shareholders—whether or not at the annual general meeting—whether it thinks the savings it is making are justified and whether it would like to illustrate what the pension arrangements are for their top executives and what those are for those who were in businesses in Ayrshire and other parts of the United Kingdom when it made its decisions. Is it lawfully open to putting the pensioners in the situation suggested by the hon. Members for Ayr, Carrick and Cumnock (Corri Wilson) and for Central Ayrshire? If so, it should do that without delay.

[Steve McCabe (in the Chair)]

I will now call the Front Benchers. You will have noticed that we have more time than we might have expected, which means we can allow about 10 minutes—probably no more—for the SNP and Labour Front Benchers and about 20 minutes for the Minister. You are not obliged to take that time, and make sure you leave at least three or four minutes for the mover of the motion to wind up.

--- Later in debate ---

[Alex Cunningham (Stockton North) (Lab)]

It is an extra special pleasure to serve under your chairmanship, Mr McCabe—I prepared a seven-minute speech, you suggested I might get five minutes and I now have 10. That is so unusual in this place.

I congratulate the hon. Member for Ayr, Carrick and Cumnock (Corri Wilson) on bringing this matter to the House for us to debate. I am pleased she has the time do so, as she is doubtless preparing for a series of suppers over the next couple of weeks to mark the special day set aside for Robert Burns. Had he been alive today, he would, I believe, have been a constituent of hers.

Other hon. Members have explained the background to this issue. The pension plan changed hands from Compaq, which acquired Digital Equipment Ltd, to Hewlett Packard when it acquired Compaq in 2002. Hon. Members have also highlighted the legislation that determines that payments prior to 1997 are not entitled to increases in line with inflation. I welcome all the contributions that have been made.

I confess that, until Wednesday of last week, I was not aware of this particular failure, which has resulted in what appears to be the unfair and inconsistent treatment of thousands of pensioners who have a defined-benefit pension with Hewlett Packard. Despite legislation being in place that states that pension providers are under no legal obligation to increase the value of a pension in line with inflation, we are facing a situation, not unlike that facing the Women Against State Pension Inequality campaign, in which people find themselves at a disadvantage simply because they were born in a particular timeframe or had worked prior to particular legislation being introduced.

Through my research, I found that the average pension paid to Digital pensioners in 2002 was £6,008, which would now be worth £9,070 if it had kept in line with inflation—that is 50% more, and would go a long way in anybody’s home. As we have heard, when the pension plan was held by Digital Equipment Ltd and then Compaq, both companies made discretionary increases. However, once the plan was acquired by Hewlett Packard, it received only two token 1% rises, with no increases in the past 14 years. That is not good enough. The value of the pensioners’ money has decreased, the cost of living has increased and we once again face the crisis of vulnerable people facing increased difficulty and being on the verge of poverty in many cases.

[Sir Peter Bottomley]

The thought going through my mind is that, when I go back to my office, I find Parliament-supplied equipment made by Hewlett Packard. I also bought my own printers from Hewlett Packard. I am beginning to wonder whether I knew enough to regard it as a reputable firm that I should go on patronising.

[Alex Cunningham]

I certainly wonder the same thing; I have something to say to the Minister specifically on that—not about my personal choices or the hon. Gentleman’s, but about the Government’s.

Hewlett Packard can hide behind the law, and has for years, but that does not mean that what it is doing is right. When we—a group of north-east England MPs—meet representatives from Hewlett Packard a week on Monday, I intend to challenge them specifically on the decision. Despite being a large company with a substantial UK turnover, it is clearly shirking its responsibility to ensure that people who worked for a company that it took over receive the same level of support as before. Another parallel between this case and the plight of the WASPI women is that there has been no real opportunity for the people affected to make up for the shortfall in the value of their pension.

How has Hewlett Packard dealt with other pensioners in its group? Much, much better. Pensioners in all of Hewlett Packard’s European subsidiaries, except in the UK, have received regular cost of living increases. This is a case not of a business being unable to increase pensions in line with the cost of living, but of a large international corporation using a loophole in UK legislation to give it a window to not fulfil what is a moral duty. I wonder what its problem is with treating its British pensioners the same as others.

As we have heard, Hewlett Packard is not a struggling business that cannot make ends meet. It is actually the Government's largest IT supplier, and makes sales of more than a £l billion a year to the Government alone. It is a company that, in 2015, had revenues of $139 billion—not million—and profits of $7 billion. The UK Government spent £1.2 billion with the company in 2014-15, which was 25% of Hewlett Packard’s British turnover. Its highest-paid UK director received £1.64 million in 2014 and £920,000 in 2015. It would cost that company about half the cash paid to that one UK director to pay a cost of living increase this year—half the cash that one person earned in wages last year.

The pensioners affected served their time working for HP and the companies it took over. They thought they were safe in the knowledge that they had a pension and were doing everything they were supposed to. I believe the Minister should put pressure on Hewlett Packard, as I will a week on Monday, to fulfil its moral responsibility, although not a legal one, to ensure that those workers are treated fairly in retirement.

Are the Government really content with doing more than £1 billion-worth of business a year with a company that has cocked a snook at this group of British pensioners? I hope the Minister will agree that even though companies are not legally required to pay annual cost of living increases in line with inflation for workers who made contributions prior to 1997, it is a scandal that there are thousands of pensioners in this country right now whose pensions’ value has dropped significantly, and who are probably now relying on social security benefits to get by.