Ms Winterton: The Bill introduces an effective and proportionate compliance regime that is vital to the success of our reforms. The amendments strengthen the regime in several key areas, and respond to concerns raised earlier in the Bills passage.
Lords amendment No. 95 would enable the regulator to require employers to pay interest on unpaid contributions, which would help to ensure that members did not lose out because of contributions not made on time. In Committee in the House of Commons, concerns were expressed about a small minority of employers who might be tempted to try to induce their workers to opt out of scheme membership. Those concerns were shared by several stakeholders, such as the TUC, the Equality and Human Rights Commission and Age Concern. Lords amendment No. 135 would prohibit such behaviour, while Lords amendment No. 132 allows the pensions ombudsman to investigate complaints relating to a jobholder opting out of a pension scheme.
We have also closed two possible loopholes in the proposed criminal offence of wilful failure to comply. Lords amendments Nos. 112 and 113 introduce a criminal offence for individuals who may be responsible for such failure to comply within bodies corporate, unincorporated associations and partnerships.
Lords amendments Nos. 105 and 108 make it clear that the effect of a notice issued by the regulatorfor example, a compliance noticewill be suspended until any review of, or appeal against, the notice is completed. Lords amendment No. 201 gives the regulator greater flexibility to delegate the functions associated with the compliance regime, so that it can fulfil its new role in the most efficient and cost-effective way.
The remaining Lords amendments were introduced for technical reasons, or to clarify drafting. For instance, Lords amendments Nos. 69 to 75 and 80 would ensure that the regulator could exercise his powers in relation to a jobholders previous employers.
The Bill sets out an effective regulatory regime to underpin the reforms. The Lords amendments have strengthened and improved that regime, ensuring the best possible level of protection and fair treatment for both workers and employers, and I commend them to the House.
Mr. Waterson: As the Minister said, the Lords have tabled a great many amendments to the compliance regime. Some are minor, but a number are fairly important. I pay tribute to Lord Skelmersdale and Lady Noakes, who did a good deal of hard work on many of them. Much of that work involved trying to dilute the Governments affection for introducing punitive measures in almost all areas if they think they can get away with it.
Because much of the detailed work and the heavy lifting has already been done in the House of Lords, I intendwith no disrespect to their Lordshipsto speak fairly briefly on this group of amendments. I think it fair to say that the issue of enforcement of compliance was always going to pose a substantial challenge to the legislation, particularly in regard to micro-employers. The new regime for personal accounts and auto-enrolment will apply to the fish and chip shop, the hairdresser and the small car workshopin theory, they will all be subject to these provisionsand I suspect that the pensions regulator, to whom falls the task of enforcement across the board, will spend a disproportionate amount of his resources on pursuing many smaller employers rather than very large companies.
There will clearly be a temptation, at the very least, for smaller employers to try to persuade their employees not to become involved in personal accounts. They might offer a larger Christmas bonus or a cash payment as a quid pro quo. If one thing emerges with crystal clearness from all the seminars, conferences and research of the past two or three years, it is the depth of financial illiteracy among many people in the country when it comes to how pensions work, how much they need to contribute and how much they will receive in retirement from a particular level of contributions. There will be a real risk of that ignorance being used against their best interests, especially in the case of small employers.
It is worth reminding ourselves that the target audience for personal accounts consists of people in lower-paid work, who may well be working for small companies and have no existing pension provision. When I saw the Governments original proposalshere I refer particularly to Lords amendment No. 135I was surprised to note that they originally had no intention of providing for an offence of inducement to opt out of personal accounts.
I seem to remember raising the issue at one of those seminars some time agothey all seem to blend into one another.
The Minister is fortunate to come so fresh to the issue. I raised it because it seemed odd to leave it out if we were trying to achieve an holistic approach to how personal accounts would work and how employers and employees were going to comply with them.
What makes it potentially a huge issue that might strike at the very foundation of personal accounts is the issue of the interaction with means-tested benefits. We all know of the excellent work carried out by the Pensions Policy Institute some time ago that identified certain at-risk groups: people who were at significant risk of either being no better off by being auto-enrolled into personal accounts or, in some cases, being worse off as a result, including people who had started saving later, or who were renting accommodation in retirement. For us, this has always been a huge concern. At the moment, 45 per cent. or so of pensioners retire subject to means-tested benefits, and that proportion will increase inexorably over the coming years if something is not done.
Take-up is a massive issue. Yesterday the Government modestly increased pension credit, but that is no help at all to the 1.8 million or so people who are entitled to pension credit but never get round to claiming it. The Treasurys fundamental assumption when pension credit was introduced was that 1.4 million people would never get round to claiming it. There is a problem here that will not go away.
When we raised the issueinsistentlyearlier, Ministers were dismissive about what we had to say. Their basic attitude could be summed up as, Youre letting the side down, youre rocking the boatthe real prize in personal accounts is the millions of people who dont have any provision at the moment and will now start saving for their retirement. I do not disagree for a moment with that being the prize, but part of the price for that prize should not be an element of rough justice towards people in the at-risk groups who may well end up worse off because of the loss of means-tested benefits.
Whoever is in power when the chickens come home to roost will certainly not want another mis-selling scandal, where a lot of people turn round to the Government of the day and say, Well you auto-enrolled me into personal accounts, and as a result Im worse off. For the official Opposition this has always been a potential deal breaker when it came to consensus.
I am delighted, of course, that, after a lot of pressure from us, Ministers finally relented. This was two or three Secretaries of State ago; they come and they go. A process was started which has been ongoing, pulling together stakeholders and looking first at trying to identify the size of the problem and then at some of the possible solutions. The Pensim 2 model in the Department is used wherever possible, although it was not until fairly recently that that even took account of housing benefit, which makes such a huge difference to many in the at-risk groups.
I am pleased that Ministers finally relented and that the process has been ongoing for some time now; I think what is billed as the final seminar is taking place next week. A report of some sort will then be produced;
whether it will produce any solutions is, of course, another matter. It is certainly an exercise that needs to be conducted. For us it has always been clear that if this problem cannot be addressed, there is a real danger that personal accounts simply will not work. That is a debate for another day, but once we have the data and the conclusions of that exercise, what are the options in terms of trying to address the matter and reduce or eliminate the numbers of people in the at-risk groups?
Why does it matter so much at the moment? At one point, Ministers were saying that this would not be a problem until 2020 or even later, when people would start to realise that personal accounts had not been a great thing into which to be auto-enrolled. I disagreed with that; I still do. In the run-up to 2012, if that is the start date of personal accounts, people will be writing stories in the pressparticularly the financial pressabout people who are worse of as a result of being auto-enrolled. Indeed, some have already been writing such stories. If those stories are written, the unscrupulous employer will use them to help to persuade employees in small firms, in particular, that they do not need to be involved with personal accounts.
We know that there is a huge element of irrationality about peoples approaches to pension provisionan unwillingness to engage with the real issues and what the best solution is for them in the long run. We could end up with the nightmare scenario whereby the wrong people allow themselves to be auto-enrolled and end up worse off or no better off as a result, and the wrong people are persuaded to opt out when it would be very much in their interests to join, particularly relatively young people in the work force. This is why the issue of inducement to opt out has always been, for us, very important.
I have no quibble at all with this and related amendments; it is excellent that the matter has been addressed. There will now be an offence of inducement to opt out, which I imagine will be used sparingly by the regulator, but it is there, and it should be publicised as widely as possible. We are very supportive of the measure, and indeed of all the other improvements to the Bill, many of them to the credit of the Conservative Opposition in the House of Lords. Without further ado, I register our broad support for this group of amendments.
Paul Rowen: If auto-enrolment is the key to the success of the Bill, ensuring that there is proper compliance will determine whether it delivers what it promises. As the Minister said, the TUC, Age Concern and others expressed concerns about this issue, and the amendments deal with many of those concerns. We are talking about a vast number of employers. As the hon. Member for Eastbourne (Mr. Waterson) said, we are concerned not with the large companies who have personnel departments that are used to organising such things, but with the local hairdresser or chip shop owner. Ensuring that they are delivering, and that there is a regime in place to deal with that, is essential.
Another question raised by the TUC was who would do the work on compliance. The pensions regulator is involved, but what steps is the Minister taking to ensure that it is adequately resourced? Has the Department given any thought yet to what additional resources it will need to carry out the compliance role? As well as the measures in the Bill dealing with compliance, what steps will she take in the run-up to 2012 to make sure
that such small employers are aware of their obligations and that there is a range of training and materials available to support them in that role? Many of the employers who will be introducing personal pension schemes will not have experience of doing this in the past. That will be a vast change. I am disappointed that the need for face-to-face interviews for people over 50 was not accepted, because making people aware of the advice available to them and what they are entitled to is important.
On Lords amendments Nos. 105 and 108, I am again grateful that the Government have listened and have taken notice of the other places Constitution Committee, which I understand wrote to the Government in June expressing concern at the discretion afforded to the regulator, who could choose whether or not to suspend the effect of a notice while someone is seeking a review. Those two amendments are sensible. It is important to have clarity on this issue.
Ms Rosie Winterton: I thank the hon. Members for Eastbourne (Mr. Waterson) and for Rochdale (Paul Rowen) for their support for the amendments. The hon. Member for Rochdale raised a couple of points that I wish to address.
The costs will depend on the detail of the operational design of the compliance regime, but officials at the regulator are developing cost estimates both for provision of the compliance regime by the regulator and for perhaps delegating or contracting out elements of the regime, which is permitted under the Pensions Act 2004. That will inform the regulators decision about how to deliver the service.
On the wider issue of funding, the pension regulators extended role will clearly be central to the success of the reforms. We are committed to supporting the regulator in that. We have said that set-up costs for the compliance regime will be funded by way of grant in aid, and we are considering how ongoing compliance costs would be funded.
It is important that we work with small employers to ensure they are aware of what their obligations will be, and the Government certainly intend to make sure that there is consistent and coherent information to support the introduction of the reforms by helping to raise awareness.
I take on board the disappointment expressed on issues to do with personal advice to each individual. We want to make sure that the information that people need is targeted, so it is relevant to individual circumstances.
Madam Deputy Speaker (Sylvia Heal): With this it will be convenient to take Lords amendments Nos. 140 to 145, 147 to 149, Lords amendment No. 150 and amendment (a) thereto, and Lords amendments Nos. 151, 236 to 240, 281 and 282.
Ms Winterton: The Pensions Commission proposed the establishment of a low-cost, simple pension scheme for low to moderate earners currently without access to a pension. The creation of the personal accounts scheme will enable all employers to fulfil their new pension duties.
Lords amendment No. 139 is an Opposition amendment that we have accepted. It establishes a duty on the Secretary of State to set up the pension scheme, rather than a power to do so. Associated minor and technical amendments Nos. 140 to 145 will ensure that the legislation works correctly and clearly. The delivery authority will establish the personal accounts schemea task of considerable complexity. Amendments Nos. 151 and 282 will allow the delivery authority to appoint as executive members individuals on secondment or loan from other organisations. That will enable the authority to recruit the best peoplestrong leaders with expertise and specialist skills in a variety of areas.
Amendment No. 281 ensures that appropriate changes in relation to the personal accounts delivery authority are made to the Pensions Act 2007 once this Bill is enacted. The trustee corporation will be a sole corporate trustee, with initial appointments made by the Secretary of State in line with guidance on public appointments issued by the Office of the Commissioner for Public Appointments.
Amendment No. 236 requires the Secretary of State to consult the chair of the trustee corporation prior to making any appointments to the corporation in the initial period. This was always the intention, but we listened to the Oppositions points, which is why we have introduced the amendment. Members of the trustee corporation will be public servants, and therefore subject to the time limits on tenure of office provided in the OCPA guidance. To that end, amendment No. 237 increases the maximum term of appointment from four to five years to align it with the guidance. Amendment No. 238 allows the corporation to delegate a function, within the scope of the order and rules, to any member of staff. This amendment ensures that the trustee corporation has flexibility within its remit in terms of staffing.
Amendments Nos. 149 and 150 and 239 and 240 clarify that any loans provided by the Secretary of State to either the authority or the trustee corporation should at least cover the cost of Government borrowing. That firmly establishes in the Bill our intention that the funding for setting up and operating the scheme should be delivered at nil cost to taxpayers. The amendments will also ensure that any financial assistance that the Secretary of State might provide will be consistent with the general rules on Government lending.