Indexation of Pension Rights
1/212. If he will take legislative steps to ensure that companies who previously provided indexation of pension rights accrued before April 1997 but have since lapsed, reintroduce indexation from April 2026.
16. What steps he is taking to help tackle the potential impact of the lack of indexation on pre-1997 pensionable service in defined benefit pension schemes on people affected.
I obviously recognise the challenges facing those without inflation protection, particularly after the cost of living pressures of recent years, and I think that recognition is shared by Members on both sides of the House. I met a cross-party group of MPs earlier this year to discuss exactly this issue. Reforms in the Pension Schemes Bill give trustees more flexibility to share surpluses in their DB pension schemes with employers, and to negotiate for members to benefit from any such sharing of surpluses. That could include discretionary increases to address the issue raised by my hon. Friend the Member for Llanelli (Dame Nia Griffith).
As a result of the efforts of pensioner associations, we know that there have been unintended consequences of the Pensions Act 1995, which made it legal to stop payment of indexation to the pre-1997 pensioners of successful multinationals such as 3M and Hewlett Packard Enterprise, who, having been recruited with the promise of index-linked pensions, are now suffering hardship. Their pensions have already been frozen for at least 15 years, despite healthy funds and trustees’ pleas. What will the Minister do to stop this dishonourable practice, so that these companies deliver the financial security that they promised?
I absolutely recognise the issue that my hon. Friend has raised: any of us in that situation would want those pension increases to continue. She is aware of the legal background, but I should point out that scheme rules govern when inflation-linked increases can be paid. They are not changed retrospectively, but the Pensions Regulator has spelt out that trustees should consider those who are not receiving inflation-linked increases when making their decisions, and should also consider the history of making such awards—particularly in some of the examples that my hon. Friend has given. As I have said, I think that the provisions in the Pension Scheme Bill give trustees more power to argue for those increases.
I have been contacted by a constituent who, along with her husband, worked for Hewlett Packard. They accrued their pensions before 1997, and now, along with about 50,000 members of the Pre-97 Alliance, they are facing real financial hardship. In 10 years’ time, their pensions will be pretty much worthless. Will the Minister not consider legislating to ensure that these people are not left in poverty, having been promised proper pensions when they started work for the companies concerned?
The hon. Lady has mentioned a specific company, although a small number of others are in the same position. I am sure that not only the people running that company but the trustees will have heard the powerful case made by Members on both sides of the House. These decisions must be made in line with the scheme rules, but no one wants savers to see the value of their pensions fall over time, and I hope that employers will take the case being made in the Chamber seriously.