A group of Hewlett Packard pensioners are calling on the government to address an indexation legal loophole in the upcoming defined benefit white paper.

Under UK law, any DB scheme pension built up after 6 April 1997 must be increased in line with the consumer prices index (CPI) or 5 per cent, whichever is lower, and any pension built up after 6 April 2005 is increased in line with the CPI or 2.5 per cent, whichever is lower. But increases to pensions built up before 1997 are at the discretion of the employer with no legal obligation to pay, although most companies do.

HP is one of the companies that has chosen not to index link its pensions, therefore the HP pensioners are campaigning for the government to change the law around indexation. The HP Pensioner Association believes that the most prevalent threat that undermines members' confidence in their schemes, is the erosion of their pensions' buying power.

The Association said: “This grossly unfair and age-discriminatory piece of legislation was presumably introduced in the way it was in order to ‘phase in’ the attendant costs. But that was over twenty years ago, and to their great credit, virtually all large schemes have long since introduced policies or rules which ensure all their pensioners are inflation-proofed irrespective of the law. If mandatory indexation for pre-97 pensioners were to be introduced, the impact on large schemes would be limited to a few employers who, like HP, are using the law to cheat their pensioners of benefits that they should be paying.

“However, a significant number of small schemes could be impacted but need not be, because, unlike large schemes, they are neither designed nor expected to provide cost-of-living increases. As such they are equivalent to fixed annuities and different in nature to the larger schemes. Therefore it would not be difficult to regularise this distinction between large and small schemes in order to avoid imposing inappropriate obligations on small schemes that were never intended to be part of the product.”

When announcing the DB white paper, former Secretary of State for Work and Pensions David Gauke said the aim was to “restore consumer confidence in final salary schemes”. The HP Pensioner Association is determined to press the new Secretary of State for Work and Pensions, Esther McVey, to hold true to the aim of her predecessor.

The Association believes that if the white paper does not address the use then Prime Minister Theresa May’s pledge "to protect the pensions of ordinary people from the actions of unscrupulous company bosses" will be shown to be hollow words.

The HP Pensioner Association has written to McVey, and a cross-party group of MPs led by Sir Hugo Swire has asked the Minister for a meeting prior to the issue of the white paper in order to discuss a potential way forward.

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