Pension Increase Correspondence
The following link will take you to the old website which has a comprehensive breakdown of the correspondence between HPPA and the company around the lack of discretionary increases. This is from the years 2011, 2012 and 2016.
When we published our newsletter back in May, we had just found out that HP, once again, had not awarded a discretionary pension increase to a large proportion of our members. This is an issue which badly affects thousands of ex-Digital members and a smaller number of ex-HP plan members, but many thousands more are partially affected.
Dear Ian,
There are no prescribed conditions that in themselves would trigger the granting of a discretionary increase to pensions in the HP Plan.
As I believe you are aware, the Company reviews the situation each year in light of the circumstances prevailing at that time. These circumstances include, but are not necessarily limited to, the Company’s business and financial position which will in turn take into account the funding position of the Plan, the accounting impact of any increase and any contribution required to meet the cost of an increase.
Regards,
Sharon.
Dear Mr Apotheker,
I am writing to you from the UK, on behalf of the Hewlett Packard Pension Association,
regarding the very worrying state of affairs affecting a significant number of HP Retirees
in the UK, and specifically about what we believe to be a breach of good faith.
Pension increases for some HP UK and ex-Digital Retirees are, in large part, at the
discretion of the Company.
Employees, now Retirees, always understood that whilst increases may not necessarily
be paid every year, in good times discretionary increases would be paid, and in not so
good times they would not. This position was acknowledged in various documents over
the years.
Over the past 7 years, however, a single increase of 1% has been granted, and the
understanding of a linkage between company performance and pension increases appears
to have been lost. Previous administrations of HP, Digital and Compaq did adhere to the
understanding, and awarded increases when they were proposed by the pension fund
Trustees.
We have sought to raise these matters with HP UK, but with little success. The Company is
reluctant to enter discussions, or to supply any meaningful information as to how their
discretion is applied. When we last checked, the HP UK Retirees were the only ones not
receiving discretionary increases in Europe. Two years ago, when we met the previous UK
HR management, we were told that pressure from HP US Finance was the reason for the
lack of increases – we are increasingly reluctant to accept this version of events.
During this 7 year period, pension purchasing power for those affected has reduced by 20%.
Consequently, the UK Retirees are very concerned about the future.
In particular, they are concerned about what they see as a breach of good faith – the same
good faith with which they entered into their pension arrangements, the same good faith that
was an outstanding characteristic of the organisations for which they worked.
You have spoken publicly about your wish to restore traditional HP values.
We are bringing these matters to your attention, in the hope that you will ensure that those
values of openness, trust and, in particular, fair dealing are made apparent to the UK HP
Retirees who reasonably expect that such values will be applied in the determining of
pension increases.
We would appreciate an acknowledgement of this email.
Yours sincerely,
Ian Young (Hewlett Packard Pension Association)
Background
The Hewlett Packard Pension Association (HPPA) was formed just over a year ago, and is
the fastest growing Retiree Club in HP Worldwide. In establishing the Club, we have had
excellent support from the Pension Trustees, the Retiree Programs Office in the US, and
our Advisory Board of retired senior HP and Digital executives. We have around 2000
members and are still growing fast.
HPPA is currently working closely with the Corporate Responsibility Volunteer Program, and
we have just finished a project with the UK team.
Hello Ian,
Thank you for your follow up e-mail to Léo Apotheker related to your concerns about pension increases for certain UK retirees. Léo received your e-mails and has asked the Global Benefits team to review your concerns.
We will be back in touch shortly with a more formal response, but wanted you to know we are in receipt of your messages and following up accordingly.
Regards,
Elaine Beddome
Vice President, HP Global Benefits
Hello Ian,
Thanks again for your recent message to Léo Apotheker regarding UK pension benefits and the Hewlett Packard Pension Association’s concerns regarding the granting of discretionary increases. Léo reviewed your e-mail and asked me to look into your questions and provide a response.
On behalf of HP management, we can appreciate the Association’s concerns about cost-of-living increases for pension benefits, and we recognize that these benefits can be an important source of income for retirees and former employees. HP reviews our UK pension programs on an annual basis, and we clearly understand the Association’s perspectives and priorities related to discretionary increases. At the same time, HP management must consider the significant financial impact of granting increases, and balance these costs with the ongoing pension contributions required by the Trustees to fund existing benefits. Financial considerations and our focus on funding for existing benefits are the primary reasons we have granted increases infrequently in the past.
You’ve characterized the limited frequency of discretionary increases as a “breach of good faith”, suggesting that HP has made commitments in the past that are no longer being honored. We do not believe this is the case:
–With respect to benefits for former Digital employees, the decision not to apply automatic increases to pre-1997 benefits was made by Digital Equipment Corporation, many years before HP played a role with the program. Subsequent to HP acquiring the plan in 2002, increases admittedly have not kept up with general cost-of-living in the UK, but unfortunately the funding and accounting implications of the original Digital decision have resulted in even small increases triggering a disproportionate impact on cash investment requirements and accounting charges for the program.
–For former HP employees who did not join from Digital, discretionary increases might be expected only to apply to members who left HP prior to retirement and before April 1997. Although increases have not been provided to these members, we do not believe any reasonable expectation of increases would have been created in the past.
I mention these points only in response to your assertion of a breach of good faith, not to suggest that increases will not be considered in the future. Please be assured past HP decisions have been based solely on the financial structure of the programs and our focus on providing funding for existing benefits. HP absolutely values the contributions of our retirees, and we appreciate the feedback you have provided. We will keep these perspectives in mind as we review the program for the future.
Thank you again for your message.
Elaine Beddome
Vice President, HP Global Benefits
1. Our response to the email from Elaine Beddome.
2. Extract from a Digital Pensions Booklet
3. A graph of the impact on pensioners
- Email to Elaine Beddome
Hello Elaine,
We thank you for the response to our email to Leo Apotheker, and the time and
effort you have taken to review the matter.
We found the comments in your final paragraph particularly heartening.
However, we feel that we may have failed to convey to you fully one of the key
underlying issues.
You state, “suggesting that HP has made commitments in the past that are no
longer being honored. We do not believe this is the case”. You are absolutely
correct, this is not the case, and we are sorry if we gave that impression.
In the case of the Digital Retirees, a series of documents were issued which
indicated how the Pension Fund would apply to Retirees, and I attach a typical
extract from the Trustee report of 1991. These documents reinforce the clear
understanding that inflation would be taken into account at review time.
It is clear that such understandings were well enough conveyed that they were
operated by Compaq following its acquisition of Digital, as shown in the attached
pension increase awards from 1989 to 2011.
There is a strong view amongst Digital Retirees that HP, whilst not itself making
any commitments, did inherit, in a moral rather than legal sense, the understanding
that Compaq had inherited and maintained. It may be that those responsible for
pensions administration in HP UK are no longer aware of these understandings,
or the relevant documentation. We would hope that this is not the case.
In addition to the above, HP ceased payment of discretionary increases to HP
Retirees in 1997.
We hope you can understand the disappointment and distress being shown by
the Retirees affected, and who have written to us – they feel that HP has walked
away from the previous understandings.
We hope this information better explains the background, and hence the strength
of feeling, of those who are affected by their dependence on discretionary
increases.
Meanwhile, we thank you for your time and consideration of this matter, and hope
that you will find this useful as you review the program for the future.
Best regards,
Ian
2. Extract from Digital Pension Booklet
3. A graph of the impact on pensioners
We did not receive an answer to that mail, but we were not entirely surprised, as Elaine Beddome was on holiday, and Leo Apotheker was dismissed from his position on her return.
We sent her the email below, which informed her that we were about to publish our correspondence – we did not receive a reply.
Hello Elaine,
It is now about a month since we replied to your email, and we would like
to know if you have anything to add, in light of what we sent to you.
We are aware, just from reading the press reports, that things might be
quite busy in HP right now!
The reason for the reminder is that we would like to publish our exchange
of emails, to let our members know what is happening. We thought it only
fair to inform you of this, because our distribution list does contain a significant
number of HP employees, and pre-Retirees (see note) who are still working in
a variety of large companies.
Best regards,
Ian Young (HPPA)
Note: The pre-Retirees are ex-HP employees who are still members of the
pension fund, and who will become Retirees at some time in the future – their
contact details are held by the Trustees. Their funds are incremented every year,
as per current legislation, but they are becoming increasingly aware that this may
not continue when they retire. There are around 4 times as many pre-Retirees as
Retirees, and quite a few have asked to kept appraised of the situation between
Retirees and HP.
However, the new CEO, Meg Whitman, wrote to all Retirees registered with the Retiree Programs Office, expressing her commitment to HP Retirees, and we felt that this was the ideal opportunity to press again for a response. Our mail to Meg Whitman is below:
Dear Ms Whitman,
I am writing as a board member of the Hewlett Packard Pension Association (HPPA),
the fastest growing Retiree Club in HP World Wide.
We would like to thank you and Ray for the note you both sent to Retirees, at what
must be a very busy time for you both – your taking the time and trouble is appreciated.
We would also like to congratulate you on your appointment, and we sincerely wish
you all the best for the future.
Over the past two or three months we have been engaged with Leo’s office, and
Elaine Beddome, on a difficult but very important issue affecting a group of HP UK
Retirees.
Briefly, unlike the majority of HP UK, and other European pension plan members,
whose pensions have a measure of inflation protection, the pensions of a group of
ex-Digital (now HP) and some HP Retirees are subject to discretionary increases.
Prior to 2002, Digital and Compaq management granted annual increases which
were broadly in line with inflation.
Since 2002, under HP management, all increases have virtually ceased – the graphic
attached tells the story. This is now resulting in financial problems for some Retirees.
Equally important, this is not the arrangement that affected Retirees believed they
were signing up for.
We appreciate that this is a difficult issue. However, we believed that, as a result of
our correspondence with Elaine Beddome and Leo’s office, we had at least achieved
a measure of engagement. (key email exchanges attached for info)
We would very much appreciate your help in ensuring that the engagement on,
and working of, this issue continues.
Best regards,
Ian Young (HPPA)
After another chasing mail, we received this response from Elaine Beddome.
Hello Ian,
Thank you for your recent message, and for your previous message of 12 August.
We appreciate the information you provided regarding historical practice at Digital and Compaq. Please be assured that HP management does understand the history regarding these discretionary increases and the concerns felt by retirees. As mentioned in my earlier e-mail, our decisions in recent years have been based on the financial structure of the programs and our focus on providing funding for existing benefits. However, we will continue to review these discretionary increases annually and will keep the perspectives of our retirees in mind as part of this process.
Thank you again for your thoughtful input and perspectives.
Regards,
Elaine Beddome
VP, HP Global Benefits
So, at the end of all the above, we feel that our message was received and understood, but we will not know any result until April 2012.
We also feel that all pension members should study the whole history of this communication with HP Corporate, and reach their own conclusions about what it means to them.