Jane Foley is among thousands of people whose private pensions have fallen behind the cost of living due to a 1990s ‘flaw’ in the law
Retirees whose private pensions have been frozen for years are demanding a change in the law so “heartless” multinationals are forced to increase payments.
Jane Foley, 69, from Reading, said she is struggling to get by because her pension has failed to keep up with the painful cost of living rises in recent years.
Foley, who worked for a firm later bought out by computer giant Hewlett Packard Enterprise, is urging bosses to start increasing their pension payments in line with inflation.
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A law passed in the 1990s by John Major’s Conservative government – aimed at requiring companies to raise pensions with inflation – left out defined benefit (DB) pension money accrued before 1997.
Most UK companies do increase payments regardless of the law. However, a small group of multinationals have used the “flaw” in the legislation to avoid annual rises in pre-1997 DB pensions, campaigners say.
“I do feel cheated,” says Foley of her DB pension with Hewlett Packard Enterprise.
“I thought it was going to be a gold-plated pension and my retirement would be comfortable. I had no idea it would be frozen,” she added.
“So many of us are desperate for increases to meet the cost of living.”
‘It’s a struggle to get by every month’
Foley worked for a company called Digital Equipment Corporation (DEC) for 22 years up to 1999. Hewlett Packard Enterprise later took over the UK firm and inherited its pension scheme.
After several years working for the NHS, Foley retired a few years ago. She now has an income of around £1,600 a month.
She receives £880 a month from her state pension, £399 a month from the Hewlett Packard pension, and £320 from the NHS pension.
“It’s a struggle to get by every month,” said the pensioner. “I have to shop frugally at the supermarket. I can’t give much to my grandchildren in presents at Christmas.”
She said that after paying all her regular bills, she is usually left with a little over £100 a month and that any unexpected bills can push her into financial trouble.
Jane Foley has seen her private pension become worth less and less in recent years (Photo: Provided)
Foley estimates that her Hewlett Packard Enterprise pension would be worth around £800 a month – double its current amount – if it had increased with inflation.
“The cost of living means the value of the Hewlett-Packard pension feels less and less over time,” she said. “I didn’t want to worry about money at my age.”
“I feel angry and so sad about it. It seems unfair and unethical that they found a way not to increase it. It’s putting profits above pensioners.
“I hope the Government realises it’s not fair to treat pensions from pre-1997 differently and fixes this in legislation,” Foley added. “It should resolve this injustice.”
‘Some people have had to sell their homes’
Foley and others in the Hewlett Packard Pension Association (HPPA) campaign group are aware of 10 other companies – including drug giant Pfizer – who also avoid increasing their pre-1997 pensions.
Campaigners estimate that just over 50,000 people who have pensions with these companies are affected by the issue, including around 5,500 people with a Hewlett Packard Enterprise pension.
Patricia Kennedy, co-chair of the campaign group, said Hewlett Packard Enterprise had increased the pension only three times – by 1 per cent in 2004 and 2008, and by 3 per cent in 2022 – in the past two decades.
The 74-year-old from Ayrshire, also a former DEC employee, said: “It’s legal, but I would argue it’s not ethical. It’s heartless.”
Kennedy added: “The value of the pension is decreasing over time. People are starting to struggle financially more than they thought.
“In some cases, people are struggling to pay bills. Some people have had to sell homes and downsize, or they can’t find the money to care for loved ones.”
Kennedy urged Labour ministers to “fix this”, adding: “It’s not fair to draw this arbitrary line in 1997, leaving thousands of people on the wrong side of that line.”
The campaign group has won support among MPs. Several are now pushing for the Labour Government to amend its own Pension Schemes Bill so pre-1997 pensions rise in line with inflation.
MPs draw up amendment to ‘put it right’
Senior Conservative Sir Roger Gale told The i Paper that he was working with a cross-party group of MPs to amend the bill making its way through parliament.
The Tory MP said it was “shameful” for companies to have effectively frozen payments. He claimed ministers could easily change the law.
Sir Roger stated: “There is a flaw in the legislation. It is wrong that a loophole in the law should be exploited to the detriment of elderly pensioners. It doesn’t need to be complicated at all. This is a wrong, put it right.”
Labour MP Clive Jones said the current pensions bill was a “vital opportunity” to make sure affected pensioners get the “comfortable retirement that they deserve”.
A Hewlett Packard Enterprise spokesperson said the company was “committed to satisfying all of its responsibilities”.
They added: “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.”
Pfizer declined to comment. The Government declined to say whether it would consider the amendment being worked on by Sir Roger and other MPs.
A DWP spokesperson said the Pension Scheme Bill would give “greater flexibility” to trustees running Defined Benefit schemes “to share surplus [funds]”.