UK Government passed buck on these pensions

IN May 2020, only months after my election to Westminster, a constituent wrote to me about their pension. They said: “As a former employee of Digital Equipment Ayr, from 1984 until 1996, I was a member of the Digital Equipment pension scheme. Annual increases were discretionary but pensions more than kept pace with the best available.

“Digital Equipment was sold to Compaq which in turn merged with Hewlett Packard in 2001. Hewlett Packard took advantage of the then UK pension legislation and decided not to provide any discretionary annual pension increase.

“To this day no further increase has been made and therefore pensions have stagnated since that time. This has resulted in many Digital pensioners having to seek state support.”

As you might imagine, I was shocked by the idea that workers who have paid into an occupational pension for many years should still face poverty in retirement. It is almost exactly four years since that first contact and in that time,

I have responded to 15 constituents on the same issue.

I have written to ministers and agreed to sign early day motions calling on the UK Government to put pressure on Hewlett Packard, a company which proudly proclaims its ethical standards, to pay the cost of living increases these workers deserve.

The UK Government, in responses to me, has passed the buck to the Pensions Regulator, which in turn has passed it to the DWP where it now lies somewhat neglected, I suspect.

Digital Equipment Ltd of Massachusetts in the US started making giant mainframe computers in the 1950s and opened its factory in Ayr in 1977. At its peak it employed 1500 people and for nearly two decades it was a major presence in the town.

Unable to keep up with technological change, Digital was acquired by Compaq in 1998. Partial sell-offs to Intel and a merger with Hewlett Packard followed, and the Ayr plant was closed in 2002.

Although Digital and Compaq had not been legally bound to pay annual pension increases, they had done so.

It was only after the transfer to Hewlett Packard that there were increases of only 1%, on just two occasions over 14 years, against 75% inflation, leaving many pensioners in dire straits.

Many of my constituents paid into their Digital pensions for more than 20 years and the bulk of their contributions were paid before 1997. Those who have not reached pensionable age do not yet know how little their pensions will be worth to them.

Regardless of the legality, this practice is heartless. As I understand it, from a parliamentary research briefing in 2007, many pension schemes voluntarily provided indexation on pensions accrued before 1997.

Would it be difficult for Hewlett Packard to offer increases to help pensioners in a very difficult time with greatly increased living costs?

Since 2002, it has had annual global net revenue of between $50 billion to £120bn, totalling in that time, around $1.5 trillion.

In 2023, Hewlett Packard’s chief executive was paid

$1.3 million and got a bonus of almost $2m and $5.7m in stock options. Shareholders got $1bn in dividends that year.

If other companies which are far less profitable can pay increases to their pensioners surely it can too.

Regardless of the legality this practice is heartless

Allan Dorans is the SNP MP for Ayr, Carrick and Cumnock