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Workplace personal pensions are an important and growing part of the pensions market. Membership of workplace personal pensions is around 47 per cent of current private sector pension membership, which represents about 3.3 million employees, involving total contributions of £6.7 billion a year.[ Official Report, House of Lords, 17 June 2008; Vol. 702, c. 957.]
He said that it had always been the Governments intention to include WPPs within the scope of this legislation, but there were concerns from a legal point of view that they would fall foul of the European directives on distance marketing and unfair commercial practices.
In our discussions with bodies such as the ABII am sure that there were similar parallel discussions with Ministersthey were very worried that if some clarity were not sought and obtained as a matter of urgency, that could stop in its tracks the healthy growth in WPPs throughout the British workplace. The good news is that the European Commission has now confirmed in writing that it takes the same view as the Government, and this group of amendments reflects that positive outcome. Let us hope that that exchange of letters with the Commission is enough to ensure that there is no future legal challenge on this issue. As far it goes, it is good news for those who were concerned about the Bills unintended effect on WPPs. It now seems clear that WPPs can be used to discharge the duty on employers to operate an automatic enrolment system. I very much welcome that, as does, I am sure, everybody involved.
Those are our concerns arising out of this group of amendments. I have argued for amendment (a). Let me leave the House with this thought, which is again to emphasise the huge importance of automatic enrolment in this legislation and for the future of British pensions. That is so much the case that a few days ago the ABI issued a statement asking for it to be dealt with in the pre-Budget report; I am afraid that it was disappointed. It says in its press release:
Automatic enrolment into workplace pensions, which is due to begin in 2013, should be brought forward and introduced as soon as possible. If it were to start in 2010, it could lead to additional long-term savings in excess of £500 million by 2012.
The Government has a golden opportunity to boost workplace pension saving by enabling automatic enrolment now. The pensions industry, employers and the rest of the private sector is ready to deliver auto-enrolment as soon as the green light is given.
It would be interesting to have some indication from the Minister as to whether that forms any part of the Governments thinking. Beyond that, I have nothing to add, and I look forward to any further comments that the Minister might have.
Paul Rowen (Rochdale) (LD): I join others in congratulating those in the other place on all their hard work. I especially congratulate my colleagues, Lord Oakeshott, Lord Kirkwood and Lord Thomas, and hon. Members here on the work they have done on a mammoth Bill, which is now coming to a close.
In her opening remarks, the Minister rightly commented on how, during the passage of the Bill, we have maintained a broad consensus, which is important for stability and long-term development. This group of amendments 101 are included, the majority of which the Government introducedshows that many of the issues and concerns raised during the Bills consideration here and in the other place have been listened to, and I welcome that.
As the hon. Member for Eastbourne (Mr. Waterson) said, auto-enrolment is the key to the success of the scheme. We are talking about between 4 million and 7 million people being enrolled, and upwards of £170 billion being invested. That is investment of a size and order considerably larger than what has been achieved in other pension schemes. It is a mammoth task, and ensuring that auto-enrolment is made straightforward and effective is going to be the key to the success of the scheme.
Amendments Nos. 9, 10, 11, 13 and 14 clarify the fact that re-enrolment will not apply if a job holder stops saving or opts out within a prescribed period before re-enrolment is due. The amendments set out the timings in more detail. Although we see their necessity, I say to the Minister that we do not want to go down the New Zealand route. It has seen a 30 per cent. drop-out rate on the quick saver scheme. Auto-enrolment is crucial to the Bills success and we need to ensure that the Government support employers as much as possible to ensure that re-enrolment is a consistent policy.
I agree with the hon. Member for Eastbourne about auto-enrolment for workplace pension schemes. That element was missing from the pre-Budget report statement yesterday, and I hope that the Minister, when she responds, will give us some idea of when, or if, the Government are considering bringing the date forward. Given the amount of work that has to be undertaken to set up the scheme, the more of the other things that we can get done earlier, and the more we can encourage people in existing schemes to auto-enrol, the better.
I am pleased that the Minister has said that she accepts amendments Nos. 23, 24 and 25, which deal with the value of the earnings threshold and ensure that it does not fall behind the increases in the level of earnings. That is critical to the success of the Bill and to ensuring that people have a pension commensurate with what they need to live on when they retire. We know what has happened to the state pension. The Government have not given a commitment to restore the earnings link by a set date, and as a result many pensioners are in poverty or are having to apply for pension credit. If we are to have a scheme, it is far more preferable to ensure that it keeps up to date with increases in earnings. That is critical. I hope that the Minister will say when she is going to restore the earnings link to the state pension. That measure could have been introduced in the pre-Budget report.
I congratulate the Government on what they have done in amendments Nos. 5, 7, 13, 16, 21, 30, 31, 55 and 134 to permit workplace personal pensions to be used for auto-enrolment. When the Bill was discussed earlier in this House, the major concern was that the auto-enrolment of workplace pensions could have been outlawed by two EU directives. Again, I am grateful for the work that the Department has done to ensure that that is not the case and that the auto-enrolment of workplace pension schemes can continue.
We support the Conservatives in their amendment (a), which stands in the name of the hon. Member for Eastbourne, to Lords amendment No. 57. We are grateful that the Government accepted Lords amendment No. 57, because it is vital that existing schemes and the duties placed on employers are made as easy as possible. Having a self-certification scheme that does not set unnecessary conditions is critical to the retention of those existing schemes. We have made the point all along that we did not want the Bill to be used as a levelling-down exercise for existing pension schemes, and the amendment would at least ensure a mechanism that would enable employers to comply with their duties satisfactorily. However, the Minister said that she had agreed with stakeholders that there was going to be a review in 2017.
I accept that. However, in the other place, Baroness Noakes questioned the need to allow the Secretary of State automatically to sweep the provision away. She did not receive a satisfactory answer, so I hope that the Minister will give us one today. Our view is that if such a major changeone that could affect existing pension schemesis to be contemplated, it should be the subject of primary legislation. So far, the Government have taken all the various groups with themstakeholders and the parties in this place. I would not want the change made possible by Lords amendment No. 57 as drafted to be made, so I hope that the Minister will reconsider her position. It is not a pressing issuethe Government will not fall if amendment (a) is accepted and it will not materially change the workings of the Billbut in the long term, people would be given the satisfaction of being listened to.
Miss Julie Kirkbride (Bromsgrove) (Con): I, too, welcome the Minister to her new role. Picking up a complicated Bill after Committee, Report and Third Reading cannot be the easiest thing to do. However, as other hon. Members have said, there has been constructive engagement among all the partiesthe parties in this House and stakeholders outsideon the way forward for these measures, as well as broad cross-party support, because we need to increase pension saving across the nation. It is therefore reassuring that that engagement has continued.
However, I would like to echo the concerns that have been expressed. If there has been one disagreement among the political parties, it is the prospect of those of our fellow citizens who have a better pension scheme than that which will be offered under the Bill finding their scheme being levelled down. Once the provisions come into force, there will clearly be a temptation for employers to look again at what they offer and to contemplate having all their employeesor at least all their new employeeson a scheme that complies with the standards of the Bill, rather than on the scheme currently in place.
I sincerely hope that the Minister will take into account the concerns that have been raised about having a self-certification scheme, so that there will not be any payroll issues relating to the administrative costs of the new measures. My particular worry, given the debate so far, is that the Minister wants to be able to strike out
what is good in the Bill by ministerial decree, rather than through further debate in the House. Employers want reassurance on this issue, and will not want to think that the self-certification provision can be taken out by ministerial decree, because that will add to the de minimis situation. We need to hear some good reasons why the Governments way forward is a good one, because the sanctions for employers who do not fully comply and co-operate include imprisonment.
Yesterday, we heard about the seriousness of the economic situation facing the country, and the Bill will add further pressure for employers, who will also face a national insurance increase around the time the Bill comes into effect. The pressures on them will be considerable, and the maximum reassurance that the House and the Minister can offer will be appreciated. I look forward to hearing her arguments, which might be in agreement with Conservative arguments.
Ms Rosie Winterton: First, I thank the hon. Members for Eastbourne (Mr. Waterson), for Rochdale (Paul Rowen) and for Bromsgrove (Miss Kirkbride)I know that the hon. Lady was also on the Committeefor their points about consensus, which has been an important part of our debates.
The hon. Member for Rochdale spoke about earnings upratings. We have certainly made clear our commitment to introducing an earnings uprating of the basic state pension. Our objective, subject to affordability and the fiscal position, is to do that in 2012, but we want to do it by the end of the next Parliament at the latest. We will make a statement on the precise date at the beginning of the next Parliament. I assure the hon. Member for Eastbourne that we will not lose interest in this issue just because the Bill is passing into its final stages. I look forward to having many discussions with him and his colleagues in the coming months and years about the various regulations and about the detail of issues such as qualifying earnings.
As both hon. Gentlemen said, we have had discussions with the European Commission about bringing forward workplace personal pensions. We are well aware that the industry wants to proceed with automatic enrolment before the planned introduction of the duties from 2012, but the relationship between the employer duty and automatic enrolment makes it difficult to do that outside of bringing in the general scheme. However, we are keen to find ways of helping employers and providers to increase participation in personal pensions today and to make the transition from active joining to automatic enrolment, under the employer duty, as soon as possible. There will be many more discussions on this issue, but there will be firm encouragement for people to participate in the schemes.
I hope to persuade the Opposition to withdraw their amendment. I hope also that the hon. Member for Rochdale will take note of the points that stakeholders have made on certification in what has been a constructive process. We have agreed to review the effectiveness of the certification procedure in 2017. As hon. Members have said, it is designed to make it easier for employers to cope with the new arrangements for workplace pension saving, using their existing provision. We hope that that will go some way towards reducing the risk of levelling down, but there is a possibility of certification leading to unintended consequences for the employer or employee.
We must make sure that individuals do not routinely save at levels below those recommended by the Pensions Commission. Also, employers might become more inclined to use the quality standard without certification, thereby making the procedure redundant.
It would be absurd for the House to rule out, at this stage, the possibility of removing certification if there were widespread consensus in 2017, through a review, that that needed to be done. It would not be appropriate then to have to wait for more primary legislation. I urge the Opposition to withdraw their amendment. There are good reasons why we have made the changes that their amendment would completely undermine.
Miss Kirkbride: Does not the Minister see that having that sword of Damocles hanging over their heads might make employers, especially rogue employers and those who are less keen to comply with what the Government want to do, more inclined to go for the lowest common denominator pension scheme?
Ms Winterton: No, I do not think that is the case. The certification procedure has been agreed with stakeholders, and employers were keen on having it to reduce the burden on them, so I do not see why the possibility of it being removed would have that effect. This is about ensuring that people make the right contribution. I honestly believe that we should have the ability to remove certification if necessary.
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