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Discretionary increases

Depending on your communication preference, we recently sent to you either an email or letter about Discretionary increases within the Plan. A copy of the content from this is shown below. 

The Trustee has in recent months received various queries from members of the Plan about the way in which their pensions in payment increase annually. This is of particular interest due to the higher inflationary environment and the impact this has on the purchasing power of members’ pensions.

The Trustee recognises the importance of this issue to many of its members. 

The purpose of this article is to provide answers to the most frequently asked questions that have been raised by members of the Plan.

  1. Do all pensions in payment from the Plan increase and, if so, do they increase at the same rate?

    In short, no. Not all pensions in payment increase and where they do, they do not all increase at the same rate.

    Whether pensions increase (and where they do the rates of increase applicable) are governed both by overriding legislation and the governing documentation of the Plan – its “Rules”. The Trustee has a duty to ensure that all members’ pensions in payment increase in accordance with the relevant legislation and the requirements of the Plan Rules.

    Under the Plan this combination of overriding legislation and the Plan Rules mean that the overall pension increase entitlement for any particular member is dependent on the period over which their pension accrued. This can (and often does) result in the pensions payable to different members increasing at different rates if their pension accrued over different periods.

    Under the Plan Rules there is also a power for Hewlett-Packard Limited (the “Company”) to award discretionary pension increases in addition to any increases which apply under legislation or the Plan Rules.  It is important to note that this power does not give rise to an entitlement to any additional increases in excess of those provided for in legislation or under the Plan Rules.

  2. What is the role of the Trustee in relation to pension increases?

    The Trustee is responsible for managing the Plan. Its primary duty is to ensure members receive their accrued benefits under the Plan. In this context, “accrued” is broadly synonymous with “promised”.

    In relation to pension increases, this means ensuring that all members’ pensions increase in line with legislation and the Plan Rules. The Trustee is also responsible for the management of the Plan’s assets, to secure the payment of the promised benefits over the lifetime of the Plan.

    This is a complex task and the Trustee is supported by its professional advisers, including actuarial and legal advisers who help to ensure that the Trustee is complying with its duties.

  3. Who are the directors of the Trustee and how are they appointed?

    The Trustee is made up of a board of directors who are ultimately responsible for all aspects of managing the Plan. The directors are appointed in one of two ways:

    • Company Appointed Directors (“CADs”).

      As the name suggests, these are appointed to the board by the Company. These directors do not need to be members of the Plan and may be professional trustees who sit on the board of several different pension schemes.

      The current CADs are: Jonathan Lord, Paul Early, Gill Manning, Keith Norrington and Martin Smith.

    • Member Nominated Directors (“MNDs”).

      These are the directors that are selected from those nominated by the Plan members. MNDs are chosen based on their skill set (to ensure the Trustee is equipped with the skills required to effectively run the Plan) and typically serve for a fixed term which, in the case of the Plan, is for a period of 3 years. However, MNDs can be reselected for further terms.

      The current MNDs are: Philip French, Beverly Clements, Phil Lawman and Philippa Oram.

    Legislation requires that at least one-third of the directors of the Trustee are MNDs. In the case of the Plan, four of the nine directors are MNDs.

    Each director (regardless of how they are appointed) has identical legal obligations and responsibilities. Importantly, MNDs do not have any special obligations or take on a distinct representative role in respect of the members of the Plan. Once appointed there is no distinction in the roles and responsibilities of a CAD and a MND.

    This is also true in respect of the two sections of the Plan – the Hewlett-Packard Section and the Digital Section. It is not the case that, for example, a director of the Trustee who was an ex-Digital employee has any different or additional responsibilities in respect of members of the Digital Section of the Plan.

    These obligations and responsibilities apply in relation to the payment of pension increases. All directors have identical duties to secure the payment of promised pension increases to all members of the Plan in accordance with applicable law and the Plan Rules.

  4. Who has the power to award discretionary increases to members of the Plan? 
  5. The benefits that are payable to members of the Plan are governed by the Plan Rules and applicable law. The Plan Rules and law governing pension increases is complex and the increase (if any) which applies to pensions payable from the Plan will depend on when that pension accrued.

    It is important to note that the Trustee does not have the power to increase pensions by more than is set out in legislation and the Plan Rules without the agreement of the Company.

    For certain members of the Plan with service before 6 April 1997, neither the Plan Rules nor applicable legislation provide for any mandatory increases to pensions in payment. This reflects the benefit design of the Plan, and the Trustee does not have the power to change this unilaterally.

    However, the Plan Rules (in common with many similar defined benefit occupational pension schemes) provide that the Company, as sponsoring employer of the Plan, has the power to award (in its discretion) additional increases to some or all members of the Plan. The Company is required to consider exercising this discretion on an annual basis, but this does not mean that it will necessarily exercise its discretion to award a discretionary award of additional pension increases in any given year.

    The Trustee has no power under legislation, the governing documentation of the Plan or otherwise to award (or require the Company to award) discretionary increases to some or all members of the Plan.

  6. What does Trustee do in relation to discretionary increases?

    The Trustee’s primary role is to secure the payment of the promised benefits payable to members of the Plan.

    However, as described in the answer to the previous question there is a power for the Company to award discretionary increases, and each year the Trustee requests that the Company considers the exercise of its discretionary power to award additional increases in respect of some or all members of the Plan, as set out in the Plan Rules. The Trustee is fully aware that the purchasing power of some member pensions has diminished significantly over the years and does highlight this to the Company.

    This process typically includes providing all pertinent information to the Company to assist it in exercising its power to award discretionary increases. This includes reference to the feedback provided by Plan members and (where appropriate) a request made by the Trustee to the Company for a discretionary increase to be awarded. This request is supported by actuarial and funding information in respect of the Plan which the Trustee prepares with assistance from its professional advisers. The Trustee also meets with senior personnel at the Company as appropriate to discuss the information provided and any recommendation made by the Trustee in relation to the award of discretionary increases.

    Following this, the Company follows its own decision-making process (to which the Trustee is not party) and the Trustee is informed of the decision that the Company has taken which is then communicated to members.

    The Trustee engages with its professional advisers annually in this respect and ensures ongoing dialogue with the Company. The Trustee will continue to ensure that its process for ensuring that the Company carefully considers its power to award discretionary increases remains appropriate, and will pass on feedback provided by the membership in this respect

  7. Will discretionary increases be provided in the future?

    The Trustee cannot say whether or not the Company will decide to award discretionary increases to members in excess of those payable under legislation and the Plan Rules. As set out earlier in this article, this is a power of the Company and so this is a question for the Company.

    The Trustee will however continue to ensure that the Company considers the exercise of its power, make recommendations for discretionary increases (where appropriate) and ensure the Company is aware of the feedback provided by Plan members.

  8. Members of other pension plans have been awarded increases higher than those I receive. How is this being achieved and are they discretionary increases?

    While overriding legislation will apply in broadly the same way across all UK defined benefit pension schemes, the rules of each pension scheme will differ. This reflects the benefit design of the pension schemes as set up by their sponsoring employers.

    The trustees of each such pension scheme has a duty to administer their scheme in accordance with the rules governing their scheme. In some cases, that may mean that increases awarded under different pension schemes will differ and may be higher or lower than those provided for under the Plan.

    Therefore, simply because members of other pension schemes receive higher pension increases than those payable from the Plan does not mean that a discretionary increase has been awarded.

    In the same way, the rules that apply to the payment of discretionary increases will differ between pension schemes. As set out earlier in this article, the Plan’s Rules provide for a power for the Company to decide whether to award discretionary increases. This balance of power differs between different pension schemes. If members in other schemes have received discretionary increases, this is because of the different circumstances for that scheme and their relevant employer.

  9. Instead of an ongoing pension increase, could a one-off payment be provided to pensioners to reflect the higher inflation?

    A one-off payment from the Plan is not currently possible under UK pensions legislation.

  10. How can I raise further questions or make representations to the Trustee?

    In common with many pension schemes the Trustee has seen an increase in queries from members, including in relation to pension increases. It is important to the Trustee that members are provided with key information regarding the Plan and are able to have their queries dealt with fully and efficiently.

    In the first instance, members are encouraged to review the ‘PensionBytes’ section of the Plan website to see if an article providing an answer has already been published. There is also a useful FAQ page on the website which covers the most common questions members ask.

    However, if you would still like to ask a specific question to the Trustee, you can do so in one of the following ways:

    • The Plan website includes an ‘Ask a question’ facility. This simple, but secure, online form allows you to ask the Trustee a question directly and provide the means for us to provide a response. You can access this at Ask The Trustee.
    • Alternatively, you can contact Zedra, the Trustee’s third-party secretarial provider, at
    • If you have questions about your own benefits from the Plan, please contact the Trustee’s professional third-party administrator, Equiniti, at
      Alternatively, you can contact Equiniti by telephone on 0333 207 6553.

    Please note, the Trustee (or individual directors of the Trustee) will only respond to correspondence raised in one of the ways set out above. This is to ensure that all queries have been correctly identified and can be reviewed by the appropriate person(s). Attempts to contact the Trustee (or individual directors) directly, via social media or via other methods other than those set out above will not be viewed by the Trustee or responded to. This is to ensure that all queries have been correctly identified and can be reviewed by the appropriate person(s).