Clause
5
Automatic
re-enrolment
Danny
Alexander:
I beg to move amendment No. 80, in
clause 5, page 3, line 33, leave
out subsection (6) and insert
‘The automatic re-enrolment date
shall be 1st April of each
year’.
The
Chairman:
With this it will be convenient to discuss
amendment No. 15, in clause 5, page 3, line 34, leave out from
‘that’ to end of line 35 and insert
‘fall at the beginning of the tax
year in any relevant year for all
jobholders.’.
Danny
Alexander:
I look forward to the first contribution of the
Under-Secretary of State for Work and Pensions to the Committee, in
response to the amendments in the clause. I do not know whether he is
good cop to the Minister’s bad cop, or maybe it is the other way
around. We shall
see.
The
clause deals with automatic re-enrolment. It makes a great deal of
sense to ensure that there is a regular opportunity for people who opt
out to reconsider their position to be automatically re-enrolled. The
amendment is fairly simple, so I do not intend to dwell on it for a
great length of time. It is to try to establish that the timing of
automatic re-enrolments be of maximum convenience to the employer, for
reasons of administrative efficiency that we have been discussing
previously. I think that that is also the purpose of amendment No. 15
tabled by the Conservatives. I note, for example, that the Engineering
Employers Federation suggests that it hopes that that will include
allowing employers to undertake the process on a fixed date, such as
the start of the tax year.
Amendment No. 80 gives 1 April,
the start of the tax year, as the suggested date, rather than the
anniversary date of when the individual chose not to be auto-enrolled.
If it was on that anniversary, automatic re-enrolments could go on in
large companies almost every day of the year. One would wish to avoid
that, in the interests of administrative efficiency. Whether the
Government choose to accept the amendment or not, I hope that the
Minister will accept the principle that automatic re-enrolment should
fall on a specific date, perhaps every year, and that choosing a date,
for example at the start of the tax year, that fits in with other
changes that employers might be making in tax and salary rises would
minimise the administrative burdens on employers. That would make the
automatic re-enrolment process easier and, of course, more likely to go
without a
hitch.
5
pm
Gordon
Banks (Ochil and South Perthshire) (Lab): To clarify a
point, is the hon. Gentleman saying that the individual enrolment day
he is proposing could be different for every company, and that it would
be a date that would suit, let us say, the financial calendar of an
individual
company?
Danny
Alexander:
It is good to hear from the hon. Gentleman who,
as has been said before and as he made clear in the evidence sessions,
is very knowledgeable about matters relating to small businesses. I
would take his advice on that point.
Clearly some businesses operate
tax years on a different basis, so the approach set down in the
Conservative amendment might be preferable to the fixed calendar date
in amendment No. 80. The point that I am trying to establish is that
there should be a fixed date every year, two years or whatever, when
automatic re-enrolment takes place at a date that is most convenient to
the company. The start of the tax year would seem an obvious date. That
is the simple point that I am trying to make. I do not think that I
need to dwell on it
.
Andrew
Selous:
I agree with the hon. Member for Inverness, Nairn,
Badenoch and Strathspey that our amendment No. 15 is similar to
amendment No. 80. He said that his amendment was inspired by the
Engineering Employers Federation. Ours has also been in part inspired
by what it had to say. I note that the recommendation of the Work and
Pensions Committee to the Government was that they should adopt this
recommendation that re-enrolment should take place for all employees en
masse at the end of the tax year in order to reduce the administrative
burden on employers.
I am pleased to note that the
Government in their response to the report said at paragraph
130:
“We have
been working closely with employers and their representative
organisations to design a scheme that minimises the burdens on
business.”
I am sure we
are all keen to support that. At the moment, employers would have to
track the start date and 22nd birthday of all their employees at three
year points from all those dates. Instead of having all the dates
flagged up on a computer, with letters going out
to everyone and re-enrolling everyone in one go, and instead of it being
a simple one-hit task that is done once a year, it will be a monthly
problem for
employers. Again, I
make no apology for repeating that we are bringing the world of
pensions and contributions to some very small businesses. The Minister
mentioned a garage earlier. Think of the small hairdresser or the very
small sandwich bar with one or two employees. Those are not
organisations that have large personnel and compliance departments that
can make sure that this is done easily. If the Minister does not like
amendments Nos. 15 or 80, I hope he will have something pretty
convincing to say to the Committee about how he will make this work
simply and effectively and with the least
hassle.
The
Parliamentary Under-Secretary of State for Work and Pensions
(Mr. James Plaskitt):
It is now my turn, Sir
Nicholas, to say how nice it is to serve under your chairmanship and to
deal with the amendments that have been tabled on clause 5. I am
grateful to the hon. Members for moving them in the way that they have.
We have already established that there is strong support across the
whole Committee for the concept of automatic enrolment. I hope it
therefore follows that there is equally strong support for the
principle of automatic re-enrolment. The issue is about the timing and
the way in which we can minimise the burdens for employers in carrying
out this equally important part of the process we are establishing
here.
There will, of
course, be perfectly reasonable reasons why some employees might wish
to opt out. But it is therefore important that a prompt is also built
into the system that gives them once again the chance to consider
whether they should be back in the system. The best way of doing that
is by having an automatic re-enrolment process at a suitable interval.
That is why these clauses include provisions that enable the Government
to require the periodic re-enrolment of job holders who are not
participating in a qualifying pension scheme——a timely
reminder, through the process of re-enrolment, could make all the
difference for some employees. Without that facility, they might not
again consider revisiting the decision that they have
made.
We
are conscious of the burdens that re-enrolment places on employers and
on schemes. That is why we decided that re-enrolment should happen not
more frequently than once every three years and why we placed that
safeguard in the Bill. Support for that stance came during our evidence
sessions from the consumers, represented by Which? and from employers,
represented by the CBI. They both endorsed strongly the three year
re-enrolment
period.
The amendments
would establish a link between the re-enrolment date and the beginning
of the tax year. Amendment No. 15 would do that every time the
enrolment is triggered. Amendment No. 80 would establish re-enrolment
on the same basis, but trigger it every year. Having re-enrolment every
year could triple the employer burden compared with our
proposal if people who have persistently chosen not to save still
choose not to save and opt out 12 months later. Instead of a three
yearly peak in activity, the peak would be annual.
We hope that people will stay
with pension saving, but there is a balance to be struck between
periodic re-enrolment when a person’s circumstances might have
changed and virtual harassment. Re-enrolling job holders every year
would be overdoing it. There is a risk that the message could become so
routine for those individuals that it is devalued rather quickly and so
more readily dismissed than it would be were it to come up every three
years.
I emphasise
that we are still considering the implementation of re-enrolment and
the process by which it will occur. As the hon. Members who have spoken
on the issue have indicated, we need to strike the right balance
between the benefits for job holders and the impact on employers. We
need to fully understand the impact of re-enrolment on employers and on
schemes. I have therefore asked the personal accounts delivery
authority for advice on this issue and on how it would be best
implemented. We also need to discuss with other stakeholders how best
to introduce the policy so that it minimises the burden on employers
and on schemes.
In
effect, there is a range of options on the timing of re-enrolment which
could be used to smooth its administrative impact over a calendar year,
a tax year or some other period. The hon. Member for Inverness, Nairn,
Badenoch and Strathspey suggested that one date could be chosen on
which all employers must do automatic re-enrolment. A certain logic
points towards the tax year, but that might not be the appropriate
single date for all employers. Some will have different forms of
financial years. My hon. Friend the Member for Ochil and South
Perthshire noted that the case for simplicity in respect of some
employers might point to one date, but the same simplicity argument
might point to another date for another employer. While the principle
of one date has a clear attraction, moving from that to saying that it
should be the start of the tax year will not necessarily meet the
criteria that employers reasonably have in this
area.
There
is also the option of aligning the three year automatic re-enrolment to
the date on which the individual opted out. That would create another
set of complexities for many employers. Those with highly automated
payroll systems might not find it at all burdensome. They would simply
have to log, at the point of the individual opting out, a time three
years hence when they will automatically be re-enrolled if they are
still with the firm. That would not be so easy for smaller companies,
which do not have such sophisticated processes. Those are the reasons
why we need to go on discussing the matter as we are committed to
doing. However, by tying the process of re-enrolment to the start of
the tax year, the amendments would perhaps create a peak in the
underpinning administrative activity, which would affect employers and
schemes, and incur associated costs.
The Government have already
made a public commitment in the consultation response to the White
Paper to take account of further analysis and advice from the delivery
authority, and to consult with stakeholders and the industry, before we
take our final decisions on the actual period of, and mechanism for,
automatic re-enrolment. I hope that with those reassurances, hon.
Members will be happy to withdraw their
amendments.
Danny
Alexander:
I am grateful to the Minister for that full
response. I am pleased that he is attracted at least to the idea of
having only one date in the period. There are some attractions to that
proposal, so I am pleased that the Minister is consulting business and
that he has asked PADA for its advice—that is the right
approach.
Andrew
Selous:
Does the hon. Gentleman agree, as I hope the
Minister will, that the scheme needs to be flexible and permissive
rather than prescriptive? Having heard the debate, does he agree that
amendments Nos. 15 and 80 would not do that job? However, I hope that
he will be satisfied like me with a ministerial commitment to come back
with another draft following his consultations. We want the scheme to
be flexible and permissive, to give maximum flexibility and to reduce
burdens on businesses.
Danny
Alexander:
The characteristics that the hon. Gentleman set
down for dealing with the matter are exactly the kind of thing that we
are looking for. I believe that it will be dealt with more by
regulations than in the Bill, but the Minister spoke about listening to
advice from external sources such as business organisations and PADA,
so one hopes that we will come to the same conclusion. I beg to ask
leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Mr.
Plaskitt:
I beg to move Government amendment No. 119, in
clause 5, page 3, line 36, leave
out ‘(2)’ and insert
‘(6)’.
This
is a drafting amendment to correct the construction of the clause. It
ensures that the correct reference is in place. In effect, it will
simply alter a number, so I hope that it will be agreed to as a
technical drafting amendment.
Amendment agreed
to.
Clause 5,
as amended, ordered to stand part of the
Bill.
Clause
6
Jobholder’s
right to opt in
5.15
pm
Mr.
O'Brien:
I beg to move Government amendment No. 120, in
clause 6, page 4, line 6, leave
out subsection
(4).
The
Chairman:
With this it will be convenient to discuss the
following amendments: No. 70, in
clause 6, page 4, line 12, at
end insert—
‘(5A) The
regulations must provide for the
notice—
(a) to include
information about the effect in relation to jobholders of giving notice
under this section, and
(b) to
be signed by the
jobholder’.
Government
amendment No.
122
Mr.
O'Brien:
Government amendment No. 120 removes the
restriction on jobholders that prevents them from opting in more than
once every 12 months. Government
amendment No. 122 enables the jobholder to request access at any time to
workplace pension saving with an employer contribution, but does not
oblige the employer to act on more than one request every 12 months.
Should the employer choose to accept an additional notice made within
that period, he must enrol the jobholder in accordance with the
prescribed opt-in enrolment process. This means that employees cannot
be disruptive by playing hokey-cokey with the pensions system, opting
in and opting
out.
If someone has opted out, that
person is entitled to opt back in at some point during the year.
However, as the employer need not accede to an opt-in request more than
once during the year, the employee can make such requests, but the
employer does not have to act upon them more than once. This will work
as follows. Once a year, the employer will accept employees opting in
and, at that date, will opt in those who have requested to opt in. This
is a fairly straightforward process, and the amendments clarify the
situation in respect of the way in which employers would be able to
operate.
Amendment No.
70 seeks to prescribe the process by which a jobholder is able to
trigger an opt-in, and obliges notice to be given in a particular form,
signed by the jobholder, with particular information being provided. My
reason for opposing this is not that I particularly object to the
provision proposed by the amendment, but that I would rather this be
done in regulations after we have consulted with the employers’
organisations and have had a further opportunity to look at how this
process will work in detail.
The terms of a particular form
are, I think, better dealt with in that way, unless it is a form of
great substance, as in the case of the Police Criminal Evidence Act
1984. The way in which a form is laid out may change from time to time,
and I think it is much better to deal with it in regulations, rather
than trying to put it in the Bill. I have no great objection in
principle to what amendment No. 70 seeks to do: I just think these
issues are better dealt with elsewhere, and we will come to deal with
them in terms of the way in which various forms might be dealt
with—I think that is in clause 8, “Information to be
given to jobholders”.
Andrew
Selous:
I am grateful to the Minister for his explanations
in relation to Government amendments Nos. 120 and 122. They seem
entirely sensible and I understand what the Minister is trying to do
with them. I was pleased to hear the Minister say that he was not
opposed to the principle of amendment No. 70. Our reason for
tabling it is to seek clarity, to help the employer have clear records
about who has and has not opted in, and perhaps to prevent any
come-back against the employer if, at a later date, the employee says,
“What is this deduction on my wage slip at the end of the month?
I don’t remember authorising you to take any more money from
me”. It is just to give that degree of protection to the
employer and have a proper audit trail. That is where we are coming
from, but the Minister has said that he is sympathetic to those type of
actions and seeks to clarify how that would happen by way of regulation
at a later date. With that commitment from him, I do not wish to press
amendment No. 70 to a
vote.
Amendment
agreed to.
Mr.
O'Brien:
I beg to move amendment No. 121, in
clause 6, page 4, line 15, after
‘qualifying’ insert ‘scheme which is
a’.
The
effect of the amendment would be to ensure that where a personal
pension scheme is concerned under the provisions it must meet the
definition of a qualifying scheme. With regard to how it would operate,
clause 6 effectively extends the benefits of workplace pension savings
for job holders on a voluntary opt-in basis. Job holders who opt in
under the provision will be enrolled in an automatic enrolment
scheme.
Subsection
(6) enables the Government to regulate to allow an employer to use a
qualifying personal pension scheme in place of an automatic enrolment
scheme. That might benefit some employees. Indeed, a number of
employees prefer a personal pension scheme for their own reasons.
Providing that they are going into a pension scheme, I am content that
they go into a personal pension scheme of their
choice.
The amendment
corrects the drafting for the provision that aligns with clause 3(5)
and clause 5(5), which provide for the same in respect of automatic
enrolment and automatic re-enrolment. That ensures that where a
personal pension scheme is concerned under the provision, it must meet
the definition of a qualifying scheme. I hope that hon. Members will be
able to accept the
amendment.
Amendment
agreed
to.
Amendment
made: No. 122, in clause 6, page 4, line 17, at end
add—
‘(7) Subsections (8)
and (9) apply where a jobholder becomes an active member of an
automatic enrolment scheme in pursuance of a notice under this section
and, within the period of 12 months beginning with the day on which
that notice was
given—
(a) ceases to be
an active member of that scheme,
and
(b) gives the employer a
further notice under this
section.
(8) The further notice
does not have effect to require the employer to arrange for the
jobholder to become an active member of an automatic enrolment
scheme.
(9) But any
arrangements the employer makes for the jobholder to become, within
that period, an active member of such a scheme must be made in
accordance with regulations under this
section.’.—[Mr.
O’Brien.]
Clause 6, as amended,
ordered to stand part of the
Bill.
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