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Together, this Bill and last year’s Pensions Act provide an integrated package of reforms that build on and carry forward the analysis and recommendations of the Pensions Committee. I place on record, again, our gratitude to the three Pensions Commissioners, the noble Lord, Lord Turner, Jeannie Drake and Professor John Hills for all that they have done to help us face up to the challenges, and legislate for solutions that are affordable and sustainable in the long term. Last year’s Pensions Act provided a simpler, more generous and widely available state pension. It addressed and corrected the historical inequalities in women’s state pension entitlement, provided for gradual increases in state pension age, and ensured sustainability in the long term. Taken together, these reforms set out a solid foundation upon which people can plan for retirement.
This Bill, as the noble Lord recognised, makes changes primarily to the private pension system. As the amendment sets out, the Bill ensures wider availability of pension savings opportunities, but I suggest that it does more than this. In establishing a personal accounts scheme, it specifically targets a market that has been poorly served by existing pension providers. Those on low to moderate incomes will—many for the first time—have an opportunity to save for retirement in a simple, low-cost scheme. In encouraging people to take personal responsibility for their financial security in retirement, our policy on auto-enrolment will help individuals to overcome such barriers to saving as inertia. The Bill provides safeguards on auto-enrolment, such as the right to opt out, the definition of a jobholder, and enforcement and compliance provisions to ensure that the policy is not undermined. The core policy principle is to make inertia work to the benefit of individuals, not against them.
Another key feature is to give people an incentive to save for their retirement, requiring the state, the employer and the individual to contribute towards pension savings. Finally, and importantly, in protecting and maintaining the existing market, we propose a number of measures that ensure that the personal accounts system stays focused on the unserved target market. These measures will minimise the burdens on employers in complying with the duty to register qualifying schemes and to contribute 3 per cent; roll back some of the regulatory burden on existing schemes to simplify their administration; and foster compliance by providers, employers and individuals in a light-touch but effective way.
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I acknowledge—and we will surely debate—the points made by the noble Lord, Lord Skelmersdale, about levelling down, savings incentives, auto-enrolment, to which I have referred, and issues of low cost. The noble Lord, Lord Oakeshott, suggested that they would be better debated in Grand Committee than in this Chamber, which is a fair point. I would have preferred to debate them in Grand Committee, but the decision is not ours and we are happy to debate them wherever the powers that be determine.
The noble Lord, Lord Lyell, specifically raised the issue of increasing longevity. One of the issues at the heart of Turner commission’s report, on which this Bill and last year’s Act are built, is the need to make sure that this is addressed and we have a system that is sustainable in the long term. I quote some statistics, which I have quoted once before. DWP statisticians have worked out that somebody alive today, aged 59, most likely a woman, will live to be 120. That means that next year, halfway through her life, she would get her state pension. That encapsulates the challenges of pension provision.
We will debate the detail in the coming weeks, but the broad objectives of the package, which go further than the noble Lord’s amendments, are built on lengthy discussions in Parliament, with interested external organisations and with the general public. The commitment and effort, shown on all sides in the other place, to raising awareness, deepening understanding and widening the circle of consensus is exemplary. It is a key consideration if we are to give people confidence and certainty for the long term. I applaud and warmly welcome that effort and commitment and I do not think we disagree about the general objectives of these reforms in terms of what they are or should be, but I do fear that the amendment is not an entirely full reflection of those objectives. On that basis, I would ask the noble Lord not to press it.
Baroness Thomas of Winchester: I feel slightly warmer about the amendment than does my noble friend on the Front Bench. I would call it more of a rudder for the whole Bill, putting it into context and giving it coherence. Surely the fact that not everything is in the objectives should not mean that we should not have any kind of statement on the front of the Bill. I believe that the expression is, “The best is the enemy of the good”, so I feel strongly that it should be there.
Lord McKenzie of Luton: If we set out something at the start of the Bill which we say encapsulates its objectives and it does not do that in a complete fashion, we run the risk that that will create issues around the interpretation of the legislation. We have to be mindful of that.
Lord Lyell: I wonder if the Minister is aiming at me as the open target. I am 69 years old, I have not changed sex yet, but according to the article I read out, there is a chance that I might still be here. Perhaps I might be the one; he might consider that.
Lord Dearing: Perhaps the proposed introductory clause is imperfect, but I would be interested to know if the Minister is prepared in principle to insert a more accurate form of words should the amendment be withdrawn.
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Lord McKenzie of Luton: That is an entirely reasonable request and I am certainly happy to see if what I sense is the view of the Committee can be met. I do not commit to anything, but I shall take it away to consider whether we can construct something that we would see as more complete.
Lord Skelmersdale: I am extremely grateful to all noble Lords who have taken part in this short debate. I say to the noble Lord, Lord Oakeshott, that not I, he or the Minister are even micro-members these days of the usual channels. As I said in my opening speech, we are where we are and we have to make the best of it—and I am sure we will.
I am sorry that what I said has given rise to something that I tried desperately hard to avoid; namely, a Second Reading speech. I agree that the Minister was tempted by my noble friend Lord Lyell, who of course reminded us of why we are here and what last year’s pensions Act and this Bill, taken together, are for. I am well aware that the danger inherent in purpose clauses, especially at the beginning of our proceedings, is that not all the amendments may be incorporated in a Bill; indeed, it is just possible that not all the clauses currently in the Bill will, as the Minister would like to have us believe, be incorporated. When we send it back to another place, they will all be encapsulated in it.
I ask the Minister and the rest of the Committee to look at the amendment again. I defy any noble Lord to say that the phrase “new or”—not “and”—
does not cover any possible eventuality. It certainly covers personal accounts—that was a complaint of the Minister’s. The words in the amendment were not chosen at random; they are to be found in Section 1 of the Courts and Legal Services Act 1990. If they were good enough for Treasury counsel then, they are certainly good enough for me now, and I hope the Committee will think so too. I wish to test the opinion of the Committee.
3.29 pm
On Question, Whether the said amendment (No. 1) shall be agreed to?
Their Lordships divided: Contents, 133; Not-Contents, 147.
Addington, L.
Alderdice, L.
Allenby of Megiddo, V.
Alton of Liverpool, L.
Anelay of St Johns, B. [Teller]
Astor of Hever, L.
Attlee, E.
Avebury, L.
Baker of Dorking, L.
Barker, B.
Bonham-Carter of Yarnbury, B.
Bowness, L.
Brougham and Vaux, L.
Caithness, E.
Campbell of Alloway, L.
Cathcart, E.
Chidgey, L.
Clement-Jones, L.
Colwyn, L.
Cope of Berkeley, L.
Cotter, L.
Craigavon, V.
Crathorne, L.
Crickhowell, L.
Croham, L.
Dean of Harptree, L.
Dear, L.
Dholakia, L.
Dykes, L.
Eames, L.
Eccles, V.
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Elliott of Morpeth, L.
Elton, L.
Falkner of Margravine, B.
Ferrers, E.
Garden of Frognal, B.
Gardner of Parkes, B.
Geddes, L.
Glasgow, E.
Glenarthur, L.
Goodhart, L.
Goodlad, L.
Griffiths of Fforestfach, L.
Hamilton of Epsom, L.
Hamwee, B.
Hanham, B.
Hanningfield, L.
Higgins, L.
Hooper, B.
Howe of Aberavon, L.
Hunt of Wirral, L.
Hurd of Westwell, L.
Inglewood, L.
Jones of Cheltenham, L.
Kimball, L.
King of Bridgwater, L.
Kingsland, L.
Lawson of Blaby, L.
Lee of Trafford, L.
Lester of Herne Hill, L.
Liverpool, E.
Livsey of Talgarth, L.
Lucas, L.
Luce, L.
Luke, L.
Lyell, L.
Mackie of Benshie, L.
Maclennan of Rogart, L.
McNally, L.
Maddock, B.
Mayhew of Twysden, L.
Methuen, L.
Miller of Chilthorne Domer, B.
Molyneaux of Killead, L.
Montagu of Beaulieu, L.
Morris of Bolton, B.
Neuberger, B.
Neville-Jones, B.
Noakes, B.
Northover, B.
Norton of Louth, L.
Oakeshott of Seagrove Bay, L. [Teller]
O'Cathain, B.
Onslow, E.
Park of Monmouth, B.
Perry of Southwark, B.
Pilkington of Oxenford, L.
Plumb, L.
Reay, L.
Redesdale, L.
Rees, L.
Renton of Mount Harry, L.
Roberts of Conwy, L.
Roberts of Llandudno, L.
Rodgers of Quarry Bank, L.
Roper, L.
Sanderson of Bowden, L.
Scott of Needham Market, B.
Seccombe, B.
Sharp of Guildford, B.
Sharples, B.
Shaw of Northstead, L.
Sheikh, L.
Shephard of Northwold, B.
Shutt of Greetland, L.
Skelmersdale, L.
Smith of Clifton, L.
Soulsby of Swaffham Prior, L.
Steel of Aikwood, L.
Stoddart of Swindon, L.
Strathclyde, L.
Swinfen, L.
Taylor of Holbeach, L.
Tebbit, L.
Teverson, L.
Thomas of Gresford, L.
Thomas of Walliswood, B.
Thomas of Winchester, B.
Tonge, B.
Tordoff, L.
Trumpington, B.
Tyler, L.
Ullswater, V.
Vallance of Tummel, L.
Verma, B.
Waddington, L.
Wade of Chorlton, L.
Wakeham, L.
Wallace of Saltaire, L.
Walmsley, B.
Wilcox, B.
Windlesham, L.
Acton, L.
Adonis, L.
Amos, B.
Ampthill, L.
Anderson of Swansea, L.
Archer of Sandwell, L.
Armstrong of Ilminster, L.
Ashley of Stoke, L.
Ashton of Upholland, B. [Lord President.]
Bach, L.
Barnett, L.
Bassam of Brighton, L.
Berkeley, L.
Best, L.
Billingham, B.
Bilston, L.
Boothroyd, B.
Borrie, L.
Bradley, L.
Brookman, L.
Campbell-Savours, L.
Carter of Coles, L.
Chorley, L.
Christopher, L.
Clarke of Hampstead, L.
Clinton-Davis, L.
Cobbold, L.
Corbett of Castle Vale, L.
Corston, B.
Craig of Radley, L.
Cunningham of Felling, L.
Darzi of Denham, L.
Davies of Oldham, L. [Teller]
Dean of Thornton-le-Fylde, B.
Dearing, L.
Dixon, L.
D'Souza, B.
Dubs, L.
Elder, L.
Elystan-Morgan, L.
Evans of Parkside, L.
Falconer of Thoroton, L.
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Faulkner of Worcester, L.
Filkin, L.
Foster of Bishop Auckland, L.
Foulkes of Cumnock, L.
Fyfe of Fairfield, L.
Gale, B.
Gavron, L.
Gibson of Market Rasen, B.
Golding, B.
Goldsmith, L.
Gordon of Strathblane, L.
Gould of Potternewton, B.
Graham of Edmonton, L.
Greengross, B.
Grocott, L.
Hameed, L.
Hannay of Chiswick, L.
Harrison, L.
Haskel, L.
Haworth, L.
Henig, B.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Howarth of Breckland, B.
Howarth of Newport, L.
Howe of Idlicote, B.
Howells of St. Davids, B.
Howie of Troon, L.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Irvine of Lairg, L.
Jay of Paddington, B.
Jones, L.
King of West Bromwich, L.
Kingsmill, B.
Layard, L.
Lea of Crondall, L.
Leitch, L.
Lipsey, L.
Listowel, E.
Lofthouse of Pontefract, L.
Macdonald of Tradeston, L.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Malloch-Brown, L.
Mar, C.
Marsh, L.
Maxton, L.
Moonie, L.
Morgan, L.
Morgan of Drefelin, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morris of Manchester, L.
Morris of Yardley, B.
Moser, L.
Murphy, B.
O'Neill of Clackmannan, L.
Ouseley, L.
Patel of Blackburn, L.
Patel of Bradford, L.
Paul, L.
Pitkeathley, B.
Plant of Highfield, L.
Prosser, B.
Prys-Davies, L.
Quin, B.
Radice, L.
Ramsay of Cartvale, B.
Rea, L.
Rendell of Babergh, B.
Richard, L.
Rooker, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B. [Teller]
Sandwich, E.
Scotland of Asthal, B.
Sewel, L.
Sheldon, L.
Simon, V.
Snape, L.
Soley, L.
Strabolgi, L.
Sutherland of Houndwood, L.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Tenby, V.
Thornton, B.
Tomlinson, L.
Truscott, L.
Tunnicliffe, L.
Turnberg, L.
Turner of Camden, B.
Vadera, B.
Walpole, L.
Walton of Detchant, L.
Wedderburn of Charlton, L.
West of Spithead, L.
Whitaker, B.
Williams of Elvel, L.
Williamson of Horton, L.
Woolmer of Leeds, L.
Resolved in the negative, and amendment disagreed to accordingly.
3.40 pm
Lord McKenzie of Luton moved Amendment No. 2:
The noble Lord said: In moving this amendment, I shall speak also to the other amendments in this group. The group of amendments is designed to clarify the coverage of the Bill in terms of the employer duty by removing unnecessary references to “employee”. In employment legislation, all employees are also workers. The term “employee” is a subset of “worker”. For the purposes of the Bill, it is not necessary to refer both to
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By using “worker” and capturing agency workers in the coverage of these reforms, we are ensuring that parts of the employment market are not inappropriately favoured. It is important that such individuals who are not being served by the existing pensions market should have the opportunity to start or continue saving towards their retirement, with the benefit of a minimum employer contribution. I beg to move.
Lord Skelmersdale: I am grateful to the Minister for sending me a grid of government amendments, some of which, like these two, are purely about drafting. As the Committee will know, one of my interests is drafting, so I have looked at these with particular care. The Minister need not look so shocked. When I first read the Bill, I noticed that it was littered with references to “jobholder”, “employee” and “worker”. I found in Clause 1, for example, that I simply could not distinguish between “employee” and “worker”. I am glad that, on reflection, the draftsman could not either. There are still references to “employee” in Clause 55, but no longer to “worker” in Clause 77. And what about Clauses 78 to 85?
Rather than make a meal of it and put down endless amendments, I ask the Minister to have the rest of the Bill looked at again, now that a “jobholder” is purely a worker for the purposes of Part 1, to see if other simplifications can be made elsewhere to tidy up any confusion that may remain.
Baroness Turner of Camden: I thank the Minister for this amendment. I have received a briefing from the TUC, which is also very supportive of this. It believes that otherwise some unscrupulous employers might try to avoid having a contract of employment with their staff so that their workers would enjoy fewer rights and less security. I am pleased that the amendment, by emphasising the title “Jobholders”, will restrict that from happening. I think it was at Second Reading that we introduced the further point that agency workers will not be debarred from belonging to schemes under the Bill.
Lord McKenzie of Luton: I am grateful for the responses from both noble Lords, particularly from my noble friend who has referred to agency workers. This is an important provision in the Bill.
I am happy to ask officials to look at the remaining clauses in this part of the Bill to see if any further tidying up needs to be addressed. I had a quick flick through myself and could not readily see any, but we will take it away and liaise with the noble Lord, Lord Skelmersdale, if there is anything more specific. Indeed, if, on reconsideration, he wants to raise any specific points with officials, he is just to let us know.
On Question, amendment agreed to.
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Lord McKenzie of Luton moved Amendment No. 3:
On Question, amendment agreed to.
3.45 pm
Baroness Noakes moved Amendment No. 4:
“( ) who is not a non-executive director,”The noble Baroness said: I shall speak also to Amendments Nos. 43 and 122. These are probing amendments designed to ascertain the Government’s position in relation to non-executive directors. I declare an interest as a non-executive director in what passes for my spare time.
I know that the Minister is aware that it is not normal practice for non-executive directors to take part in any pension schemes that are available for staff and for executive directors. Nor do they receive any uplift to their remuneration to reflect the non-availability of pension benefits. For the vast majority of non-executive directors, what you see in terms of directors fees is what you get, there being no hidden extras.
The same is very largely true for chairmen, who are generally also non-executive. Pension benefits are not a normal part of the remuneration of non-executive chairmen. It is not unknown for chairmen to be executive or semi-executive, especially in the non-listed space, and to be paid accordingly, but for non-executive chairmen, pension accrual is unusual.
The position, as I understand it, is almost exactly the same in the public sector. We discussed these issues during the passage of the previous Pensions Bill, now the Pensions Act 2007, when we debated the creation of the Personal Accounts Delivery Authority. The Minister will recall that some very odd provisions about pensions for non-executives were in the Bill, but he accepted that they were out of line with policy guidance and produced government amendments to put the position back to where it should have been; namely, that the non-executives did not get pensions.
In this group of amendments, I have offered two possible ways of excluding non-executives from auto-enrolment. The first, in Amendment No. 4, would remove non-executive directors from the definition of a “jobholder” by adding another paragraph to Clause 1. The second way, in Amendment No. 43, would remove non-executive fees from the definition of “qualifying earnings” in Clause 12 by adding a new subsection after subsection (3). To support either or both of those amendments, Amendment No. 122 would add to the definitions in Clause 86 that of “non-executive director”. The Minister will note that this covers both companies and other corporate bodies and hence should deal with the quangos that litter the public sector.
This definition may not catch absolutely everyone in the public sector—I am thinking about, for example, the various non-executive members of departmental boards. The status of those individuals is somewhat ambiguous. They are not boards of a corporate body but pretend boards, aping what happens in corporate life or quangos. When we considered the Commissioners for Revenue and Customs Bill in 2005, we raised this
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“In line with the recommended practice for central government departments, the non-executive directors of the predecessor departments”—
that is, the Inland Revenue and Customs and Excise—
- “are not employees. The same arrangements will follow forward into Revenue and Customs”.—[Official Report, 22/2/05; col. GC 250.]
The two non-executives on the board of the Treasury, for example, are not employees, but I assume that they are “jobholders” within the Bill. How do government departments intend to treat their non-executive directors under the Bill?
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