In a recent House of Commons debate on private pensions schemes, Alistair Carmichael, MP for the Shetlands and the Orkneys, criticised some major employers in the UK for failing to pay their pensioners discretionary inflationary increases for their pre-1997 service.
Carmichael, whose constituency includes companies such as BP, Shell and Exxon, delivered an eloquent and fervent speech, saying there was “a fundamental point of fairness at stake”, condemning such organisations who would have encouraged their staff to sign up to the company pension scheme, with the latter’s expectation of receiving annual increases in line with inflation during retirement.
The MP maintained that pensions “are simply deferred income, with our being paid later, after we have stopped working, for the service we have done.” He went on to say that the corporates “don’t seem to understand that they are the inheritors of businesses built by others and that those others are now amongst those who would be pension beneficiaries.”
Vicky Foxcroft (MP for Lewisham and Deptford) made the valid point later in the debate that “Pensions are after all, not only income while we are alive. They are also a way of providing for loved ones after we are gone.”
Carmichael cited the example of BP and Shell pension schemes that in spite of a very substantial Fund surplus, the employers vetoed requests from trustees to pay discretionary increases.
Indeed BP pensioners have raised £80,000 to take the company to court, and recently a number of them attended their company AGM and were particularly forceful in taking to task the senior executives over their treatment of pensioners.
Another MP, Allan Dorans (Ayr, Carrick and Cumnock) who spoke up for the many Hewlett Packard pensioners in his constituency and elsewhere, stated they have received only 3 discretionary increases in the last 22 years, which amounted to a mere 5%.
Click on the link here for the full debate: https://hansard.parliament.uk/commons/2024-05-02/debates/A62B8F04-30B1-4317-8035-893203EF6AAD/PensionSchemes.
Outcomes of the Select Committee hearing on Defined Benefit Schemes
During the debate Sir Stephen Timms MP, who in March chaired a Work and Pensions Select Committee on DB schemes, updated the MPs on its conclusions after hearing compelling evidence from the pensions associations of BP and HP.
The final report calls for the Pensions Regulator (TPR) ‘to find out how many schemes had discretionary increases on pre-1997 benefits in their rules and how that discretion has been exercised in recent years.’ Given recent improvements in scheme funding levels, he also called for the DWP to look at ‘ways to ensure that scheme members’ reasonable expectations for benefit enhancement are met’.
In addition the HP Pension Association is calling for a code of ethical practice to be drawn up between the TPR and the DWP, particularly on pre-1997 pensions. It proposes the former employer and its pensions trustees should work out a policy for sustainable future discretionary increases.
The Committee also considered two other elements of pension schemes: the governance of pension funds and the need to invest in driving high standards across schemes, and also the appropriate use of a fund’s surplus which often requires agreement from the scheme sponsor.
Janice Turner of the Association of Member Nominated Trustees (AMNT) observed that ‘in many cases, member contribution rates had gone up over time and benefits had been reduced.’ The AMNT in its evidence to the Consultation on DB Schemes, called for funds with healthy surpluses to look to help members who have missed out on inflation protection, and restore members’ pensions to their real inflation-proof value, alongside improving employer covenants.
PENSIONER ASSOCIATIONS ARE RALLYING
Pressure is mounting from major groups of pensioner associations, who are united in their campaigns for sponsoring companies, many of whom are wealthy multinationals, to reinstate discretionary increases. And now there is significant interest from political quarters and the press in their crusade.
As Alistair Carmichael stated in the recent parliamentary debate, “The people who run those companies should understand that we are watching what they are doing, that they have an obligation to treat their former workers and their pensioners fairly, and that if they do not have it within themselves to do that, we in parliament and in government will make sure that they have to.”