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The noble Lord said: Clauses 3, 5 and 6 require employers to enrol or re-enrol their jobholders to a pension scheme. Clause 29 then permits employers to deduct pension contributions from the individual’s pay and pass that money to a scheme. Amendment No. 89 clarifies that regulations prescribing the automatic enrolment process may require the employer to start making pension deductions from a jobholder’s salary from the first pay day after automatic enrolment. In practice, that means that if a jobholder is paid between the time they are automatically enrolled and the time when all the practical arrangements to get them into pension saving have been completed, the employer may be required to deduct pension contributions from their wages. That ensures that pension saving can start from the day a jobholder is automatically enrolled. I beg to move.
Lord Skelmersdale: This is the fifth or sixth of a large group of government amendments that we are due to look at today. Many of them are eminently sensible, but as my noble friend Lady Noakes has just said, we have queries on some of them. Incidentally, by my count, the number of amendments that the Minister’s advisers hope we will get through by the end of the day is 77. I suspect that they are a little erroneous in that view, but we shall see.
Amendment No. 89 is supposed, as the Minister said, to allow the deductions to be made from the first pay day after the auto-enrolment. However, the amendment does not actually say that; it says,
- “at any time on or after the date with effect from which the jobholder is to become an active member of a scheme under the arrangements”.
If it said what the Minister thought it said, I would be perfectly happy, but
does not give me that confidence.
Lord McKenzie of Luton: This is part of a continuing debate we are going to have about the structure of the Bill. It is about taking a power so that we can ensure that employers have to deduct upfront under any arrangements; otherwise, some might be tempted—although I accept that this is overwhelmingly not the case—to take contributions later on, even though there is an automatic enrolment requirement from day one. That would disadvantage employees in respect of their pension arrangements. This provides for a power
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The noble Lord will be aware that the precise mechanics of auto-enrolment and the opt-out period are still being worked through, which is why the provision is perhaps not as prescriptive as he would like, but the intent is very clear: to prevent arrangements being put in place whereby contributions were taken from employees down the track, after they had been auto-enrolled, so that they did not get the full benefit of that auto-enrolment. I accept that the provision is not as prescriptive as the noble Lord would wish, but these powers are part of the structure of the Bill and enable what we want to happen. I think we have agreement on what we want to happen.
Lord Skelmersdale: I fully understand what the Minister wants to happen, but I do not think, with the best will in the world, that the amendment achieves it. The Minister quite rightly wants the money to be taken on the first pay day after auto-enrolment—I accept that; it is absolutely right—but I advise him to withdraw the amendment and think it out again.
Lord McKenzie of Luton: The amendment seems to be pretty straightforward. It states:
“Regulations prescribing arrangements for the purposes of section 3(2), 5(2), 6(3) or 8(2) may require the employer to make such a deduction or payment at any time”,
et cetera. The noble Lord may balk at the term “may”, rather than “should” or “will”, being used, but the amendment provides a power so that regulations can require the employer to make those deductions from the start. I am happy to ask officials to look at it again, but I believe that it is clear and does not need it.
Lord Skelmersdale: As I have tried to make clear, it is the “et cetera” that worries me.
3.22 pm
On Question, Whether the said amendment (No. 89) shall be agreed to?
Their Lordships divided: Contents, 158; Not-Contents, 65.
Acton, L.
Addington, L.
Adonis, L.
Ahmed, L.
Allenby of Megiddo, V.
Archer of Sandwell, L.
Ashdown of Norton-sub-Hamdon, L.
Ashton of Upholland, B. [Lord President.]
Avebury, L.
Bach, L.
Barker, B.
Barnett, L.
Bassam of Brighton, L. [Teller]
Bernstein of Craigweil, L.
Bhatia, L.
Bhattacharyya, L.
Bledisloe, V.
Blood, B.
Bonham-Carter of Yarnbury, B.
Boothroyd, B.
Borrie, L.
Brookman, L.
Butler of Brockwell, L.
Campbell-Savours, L.
Carter of Coles, L.
Chorley, L.
Christopher, L.
Clark of Windermere, L.
30 Jun 2008 : Column 16
Cobbold, L.
Cohen of Pimlico, B.
Corston, B.
Craigavon, V.
Cunningham of Felling, L.
Darzi of Denham, L.
Davidson of Glen Clova, L.
Davies of Coity, L.
Davies of Oldham, L.
Dean of Thornton-le-Fylde, B.
Dear, L.
Desai, L.
Donoughue, L.
D'Souza, B.
Elystan-Morgan, L.
Evans of Watford, L.
Falkender, B.
Falkland, V.
Falkner of Margravine, B.
Faulkner of Worcester, L.
Fearn, L.
Filkin, L.
Finlay of Llandaff, B.
Fyfe of Fairfield, L.
Gale, B.
Garden of Frognal, B.
Gibson of Market Rasen, B.
Golding, B.
Goodhart, L.
Gould of Brookwood, L.
Gould of Potternewton, B.
Graham of Edmonton, L.
Greengross, B.
Gregson, L.
Griffiths of Burry Port, L.
Grocott, L.
Hamwee, B.
Harris of Richmond, B.
Harrison, L.
Haskel, L.
Haworth, L.
Hollis of Heigham, B.
Hooson, L.
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.
Jones, L.
Jones of Whitchurch, B.
Kirkwood of Kirkhope, L.
Laming, L.
Lee of Trafford, L.
Levy, L.
Lipsey, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
McNally, L.
Masham of Ilton, B.
Massey of Darwen, B.
Maxton, L.
Meacher, B.
Methuen, L.
Mitchell, L.
Morgan, L.
Morgan of Drefelin, B.
Morgan of Huyton, B.
Morris of Aberavon, L.
Morris of Handsworth, L.
Morris of Manchester, L.
Morris of Yardley, B.
Oakeshott of Seagrove Bay, L.
O'Neill of Clackmannan, L.
Palmer, L.
Patel, L.
Patel of Blackburn, L.
Paul, L.
Plant of Highfield, L.
Prosser, B.
Puttnam, L.
Ramsay of Cartvale, B.
Redesdale, L.
Rendell of Babergh, B.
Rennard, L.
Roberts of Llandudno, L.
Rosser, L.
Royall of Blaisdon, B. [Teller]
Russell-Johnston, L.
St. John of Bletso, L.
Sandberg, L.
Sharp of Guildford, B.
Sheldon, L.
Shutt of Greetland, L.
Simon, V.
Slim, V.
Soley, L.
Stone of Blackheath, L.
Strabolgi, L.
Symons of Vernham Dean, B.
Taverne, L.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Teverson, L.
Thomas of Gresford, L.
Thomas of Walliswood, B.
Thomas of Winchester, B.
Thornton, B.
Tomlinson, L.
Tonge, B.
Truscott, L.
Tunnicliffe, L.
Turnberg, L.
Turner of Camden, B.
Vadera, B.
Wallace of Saltaire, L.
Walmsley, B.
Walpole, L.
Warnock, B.
Watson of Invergowrie, L.
Wedderburn of Charlton, L.
West of Spithead, L.
Whitaker, B.
Whitty, L.
Williams of Crosby, B.
Williams of Elvel, L.
Alton of Liverpool, L.
Anelay of St Johns, B. [Teller]
Ashcroft, L.
Attlee, E.
Blackwell, L.
Broers, L.
Brougham and Vaux, L.
Browne of Belmont, L.
Buscombe, B.
Campbell of Alloway, L.
Cathcart, E.
Colwyn, L.
Crickhowell, L.
De Mauley, L. [Teller]
Dixon-Smith, L.
Dundee, E.
Eccles, V.
Eccles of Moulton, B.
30 Jun 2008 : Column 17
Elton, L.
Fookes, B.
Gardner of Parkes, B.
Geddes, L.
Glenarthur, L.
Hanningfield, L.
Hayhoe, L.
Henley, L.
Hooper, B.
Howe, E.
Howe of Aberavon, L.
Howell of Guildford, L.
Hunt of Wirral, L.
Jenkin of Roding, L.
Lawson of Blaby, L.
Lindsay, E.
McColl of Dulwich, L.
Marland, L.
Marlesford, L.
Mawhinney, L.
Miller of Hendon, B.
Morris of Bolton, B.
Morrow, L.
Neville-Jones, B.
Noakes, B.
Northesk, E.
Park of Monmouth, B.
Perry of Southwark, B.
Roberts of Conwy, L.
Rogan, L.
Selborne, E.
Selsdon, L.
Sharples, B.
Shaw of Northstead, L.
Sheikh, L.
Skelmersdale, L.
Strathclyde, L.
Sutherland of Houndwood, L.
Swinfen, L.
Taylor of Holbeach, L.
Trumpington, B.
Ullswater, V.
Verma, B.
Wade of Chorlton, L.
Wilcox, B.
Windlesham, L.
Resolved in the affirmative, and amendment agreed to accordingly.
3.31 pm
Clause 29, as amended, agreed to.
Lord Skelmersdale moved Amendment No. 89A:
(1) Before the coming into force of the other sections of Part 1 of this Act, the Secretary of State shall publish his projections of the numbers of people likely to be subject to means-tested benefits (including housing benefit) and in at risk groups following the introduction of personal accounts.
(2) If the projected figure published in accordance with subsection (1) exceeds 10% of the total expected pensioner population, the implementation of the scheme under section 58 of this Act shall be postponed for at least 12 months.
(3) The Secretary of State shall publish any proposals for reform to address the findings in subsection (1) above concurrently with the publication of the projections thereunder.”
The noble Lord said: The amendment is reasonably self-explanatory. It is about having a report on means-tested benefits, and would introduce a requirement for the Secretary of State to report on the Government’s projections of how the introduction of auto-enrolment into personal accounts—indeed, any account—will impact on those likely to be subject to means-tested benefits. It would postpone the implementation of the scheme if that projection were too high.
After pressure in another place, the Government have done quite a lot of work on the impact of means testing, and have recently taken steps to slow the growth in the number of pensioners it will affect. I understand that that work is continuing. These reforms to the state pension and the second state pension have had a large impact. Under the Government’s original scheme, we would have had nearly 80 per cent of pensioners on means-tested benefits in 2050. Under the new scheme, we are looking at an estimated 30 per cent or so still being eligible. This is a huge improvement, but the number is still high. I am optimistic that there is more improvement to be made. This is not the place for a debate on how this could be achieved,
30 Jun 2008 : Column 18
The underlying assumption that enrolment into a pension scheme is a good thing underpins the whole Bill. From the central implementation of auto-enrolment to the provision of generic advice, the Government will be sending a message loud and clear to the target market that it is a good thing for them to put money into a pension scheme. Even before we get to that point, I believe that the Government need to run a lead-in campaign, probably along the lines of “Tell Sid”, which was so successful in persuading people to buy into the privatisation of British Gas in the 1980s. Both messages need to be unambiguous as they will be directed at those who do not have a deep understanding of the issues that surround pension provision and are not placed to assess any government advice against their own circumstances. It is therefore even more important to ensure that this message is not misplaced.
I know that the Minister will fully agree with me—this time, anyway—on the importance of ensuring that qualifying schemes are seen to be worth while for all those participating. The Government have produced reports and presentations seeking to reassure us that the vast majority of contributors will have a return on their savings and that those who will not could never have been predicted in any way. Some of these studies are still in the pipeline and will further inform the decisions on the final form that personal accounts and qualifying schemes will take.
If the Government are serious about targeting personal accounts effectively and are careful about the accuracy of their generic advice, the terms of this amendment should not be hard to fulfil. Indeed, some might see it as a necessary benchmark to ensure the accuracy of that information and a crucial step in reassuring the public and the media of the worth of private pension saving. I am particularly worried about the activities of the media in this area.
This amendment does not seek to drive the Government in a different direction from where they say they intend to go. Instead, it seeks to ensure that decisions around the implementation of auto-enrolment and personal accounts will continue to take account of this issue, even after the Bill has left Parliament. I beg to move.
Baroness Hollis of Heigham: I wonder whether the noble Lord can help me. I am not sure that I fully understand the intent of proposed new subsection (2), which states:
“If the projected figure published in accordance with subsection (1) exceeds 10% of the total expected pensioner population”.
Does that mean 10 per cent of the pensioner population, or 10 per cent beyond the pensioner population expected to be on benefit, given that about 25 per cent of pensioners draw housing benefit now—that figure is not likely to fall—and that some 30 per cent, perhaps more, will continue to draw council tax benefit? Is he saying that all this must come into play given 10 per cent of a retiring population, or the full existing pensioner population, or is the 10 per cent greater than the pensioner population already in receipt of
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Lord Skelmersdale: Proposed new subsection (2) means much as it says. When the number of people on expected means-tested benefits exceeds 10 per cent of the pensioner population—I put the word “expected” in another part of the amendment; I hope that makes it clearer for the noble Baroness—a report will be published and the introduction will be delayed.
Baroness Hollis of Heigham: Perhaps the noble Lord could help me further. If in 2011, say, the Government were to publish a report stating that they expected that of the total pensioner population in 2012, instead of 30 per cent there might be 25 per cent on council tax benefit, and that instead of 25 per cent on housing benefit, as now, there might be 22 per cent, does that mean that, according to the rest of the proposed new subsection (2), the whole of this Act must be postponed?
Lord Skelmersdale: Yes, it does.
Baroness Hollis of Heigham: Can the noble Lord suggest how, under any circumstances, he will remove council tax benefit and housing benefit from an existing pensioner population—all 11 million or so of them—who are in their existing housing with their existing income and entitlement? How will he bring the number down from 30 per cent or 25 per cent to 10 per cent in order for the second part of proposed new subsection (2) to come into play without making them poorer? Does he propose that they should have that benefit withdrawn, or that the local authority should cut rents, or that the Government should halve council tax? Given that he is dealing with the existing pensioner population, he cannot have more than marginal changes at the edges of the statistics.
The noble Lord is therefore saying that the amendment would in effect delay the implementation of the legislation to the disarray and discomfort of all the stakeholders involved who have been planning to this timetable. There is no way in heaven or hell that you can deliver proposed subsection (2), given the existing pensioner population who are already in the council houses and flats and housing association homes and claiming council tax benefits now. The amendment is nonsense. It is simply a recipe for delay that would disrupt the entire planning process for all the stakeholders who are working to the 2012 deadline. I suggest that the noble Lord thinks again.
Lord Oakeshott of Seagrove Bay: I shall be delighted if the debate on the amendment means again that not only two can play. I agree with what I am sure is the intention behind the noble Lord’s amendment—to highlight the continuing effect and amount of means testing in the system and to see what can be done about reducing it or at least ensuring that the most high-risk groups are properly protected from it.
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We have already discussed the basic statistics and the basic problem at some length on the amendments that my noble friend Lady Thomas and I moved on a previous day to try to ensure that generic face-to-face advice was available to the high-risk groups, so I do not want to go over that again. I should say to the noble Lord, Lord Skelmersdale, that the DWP recently published its estimates—I do not expect that those figures will change very much—of the proportion of pensioner households that will be subject to means testing at different dates. They are, of course, exceptionally high. I remind noble Lords that under the new reform system, as the department calls it, the figure for 2020 is now 55 per cent and still 40 per cent for 2050.
It might be worth pointing out that the DWP says that it is testing the sensitivities of these assumptions. It states that these four figures,
- “have been tested for sensitivity to plausible changes in underlying assumptions about the future level and distribution of pensioner incomes and future growth in rents and council tax liability”,
which is obviously significant. It continues:
- “benefits in 2050 appear to be robust to the changes in assumptions, with pension credit varying by around five percentage points”,
and the other benefits by very little.
We all know that there will be a serious problem with means testing for the foreseeable future. Although, if pressed, we would support amendments that seek to ensure that the Government update those estimates, in a way this amendment does not go far enough. I hope that all of us who are concerned about this will think carefully about this before Report. We need not only to know the shape of the figures, which are fairly clear, but to press the Government further on what we are going to do to protect the most at-risk groups.
Baroness Thomas of Winchester: I add to what my noble friend has said by discussing how auto-enrolment into pension provision will interact with those who are likely to be on means-tested benefits in retirement. This is one of the chief concerns of all those who are involved in the Bill, and is one of the great unknowns. The noble Baroness, Lady Noakes, said at Second Reading that it was,
Even the redoubtable Pensions Policy Institute said that some of the factors that will have an impact on returns from savings and personal accounts,
in predicting the point at which saving decisions are taken. It continued:
or marital status, and it may be difficult for an individual to predict whether he or she will be renting in retirement. Although it is clear that more pensioners will own their own homes in future, no one can know for certain what will happen to the housing market. Those who may have thought that their homes and jobs were safe may find that things are very different some years hence.
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In his winding-up speech at Second Reading, the Minister did not give us very much information about the Government’s review of Pays to Save. He just said that the scheme was not buying people off, that it was there for a proper purpose and that he was sure it would deliver. Perhaps in his reply he could expand on what action the Government will take and in what circumstances when the review is published.
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