No rise for Hewlett Packard pensioners

A new report says the UK is facing a hidden poverty crisis among 60 to 65-year-olds. It cites figures showing a quarter of people aged 60 to 65 live in poverty – the highest poverty rate for any adult age group. The Fabian Society report, When I’m 64, calls for long-term action targeting people at every stage of working life, from social security and health to lifelong learning, but also for short-term interventions to help over 55s stay in or return to work or better support people who cannot work. 

There are many reasons for rising concerns about pensioner poverty, including health issues and poor quality work. However, the cost of living crisis has worsened the situation, with new data from the Financial Conduct Authority showing more over-55s are cashing out their pensions due to rising inflation, leaving people with smaller pensions when they retire. A particular issue for thousands of pensioners is the failure to raise pensions in line with inflation on the part of some corporate employers. Here we look at one group of pensioners in particular.

Thousands of pensioners whose pensions were taken over by Hewlett Packard Enterprise have been told that their pensions are not rising this year to take account of the cost of living crisis.

Hewlett Packard has only raised the pension payments three times in the last 20 years, twice by 1% – in 2004 and 2008 – and once in 2022 – by 3% after sustained campaigning.

In a letter from the Hewlett Packard UK leadership team, dated April 2024, pensioners were told there is no discretionary increase to be applied this year, similar to one they received last year. No explanation was given, other than that the company has reviewed the situation and taken into account ‘various factors’. This is similar to the response given to a workingwise.co.uk request for information earlier this year when the company said: “HPE is committed to satisfying all of its responsibilities to both current and former team members. The decision on whether to grant discretionary increases to relevant pensioners is given careful consideration and is made based on a number of factors. It is reviewed on an annual basis.”

Last year around 150 pensioners gathered outside Hewlett Packard Enterprise’s UK head office in Reading and handed in a petition signed by 1,200 people protesting about the failure to raise their pensions in line with inflation. 

Some 10,000 former employees of Digital Equipment Corporation [DEC], which was taken over by Compaq which was then acquired by Hewlett Packard, are in the pension scheme, with around 60% of them currently being pensioners. That percentage is set to rise significantly in the next few years.  The defined benefit scheme gives Hewlett Packard Enterprise discretion over whether to raise the pension. In the period between 1999 and 2020 inflation rose by 76.53% in the UK. Since then we have experienced high inflation as a result of the post-Covid period. Hewlett Packard Enterprise’s annual net income for 2023 was $2.025B, a 133.29% increase from 2022.

Background

The Pensions Act 1995 introduced legislation creating limited price indexation for post-1997 defined benefit pension schemes, but it was not made mandatory for rights accrued before 1997. Nevertheless, a Government research briefing says many schemes applied some inflation protection to pensions in payment on a voluntary basis and many applied limited price indexation in 1997 retrospectively to all service.

Hewlett Packard is not the only company that has not chosen to raise pensions in line with inflation. Other US multinationals include Amex and Foster Wheeler. Pension associations have, however, had to do much of the digging themselves to connect the dots and try to get some sense of the scale of the problem.

The Hewlett Packard Pension Association [HPPA] has been trying to get its voice heard for many years and has petitioned MPs and contributed to consultations over the years. The Pensions Select Committee recently published its report on defined benefit pension schemes and, although it didn’t recommend a Code of Ethical Practice, it called for urgent changes to proposed regulation of the schemes and improvements in governance standards to ensure the schemes ‘remain an active and thriving part of the pensions landscape’. It mentions HPPA’s work and the association is now trying to get some MPs to write to the Pensions Minister and the Chief Executive of The Pensions Regulator to promote the recommendations. One of the HPPA’s members has also submitted a question to HPE’s Board.

David Carson from the HPPA says that before HPE took over the pension the annual discretionary increases were around 97% of the level of the Retail Price Index. They then plummeted to just over 3% of the RPI from 2002 onwards. The HPPA says the average pension DEC workers are getting is around £9.4K. Pensions will depend on length of service and other factors, but that figure compares with Department for Work & Pensions estimates that the average private pensioner receives around £17.2K each year after taxes and housing costs (excluding their State Pension).

Carson says the HP case has big implications for the UK in terms of pensioner poverty. Pensioners have spoken to workingwise.co.uk about their financial problems.

The HPPA estimates that up to half a million pensioners may be at the mercy of discretionary pension increases and is calling on the Government to delve deeper into the problem. “We want the Government to put the spotlight on corporate behaviour when it comes to these kinds of pension schemes. If they did an analysis of the 50 largest pension schemes that would give some meaningful data about the scale of the problem,” he says. “Our case could be just the tip of the iceberg. No-one knows what is under the surface.”

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