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The noble Baroness said: My Lords, the amendment adds a new clause after Clause 10. Its main purpose is to make it clear that employers have no responsibility to provide advice to their employees. We are clear that some, if not all, employees will need to take advice as to whether they accept auto-enrolment into an employer’s scheme or into personal accounts. We had some discussions in Committee about who should be responsible for the provision of that advice. The CBI, among others, has been clear that employers should not be responsible for advice. The Minister confirmed in Committee that employers would not be required to give advice. Subsection (1) merely places that confirmation in the Bill.
My amendment has another purpose. It relates to Clause 10, which gives the Secretary of State power to make regulations about giving information to jobholders. In Committee the Minister made it clear that the Government may well require employers to give information. Provided that the requirements are not onerous, I am sure that most employers would not object to providing information to their employees. However, employers will want to be clear that they could not incur any liability by complying with information regulations.
Subsection (2) of my amendment is designed to give employers who comply with Clause 10 regulations a safe harbour from any liability in respect of that information. When we debated this amendment in Committee, the Minister said that it was,
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That is, the Minister did not give an absolute assurance that compliance with the regulations would, in all cases, hold the employer harmless, and I believe that employers are entitled to that protection.
In Committee, the noble Baroness, Lady Hollis, supported this amendment but suggested that the concept of good faith might be usefully incorporated. I have thought carefully about that but I do not believe that it is the right addition to the amendment. An employer must comply with Clause 10 regulations and I cannot see that the state of mind of the employer in complying with the regulations would in any case be relevant. A “good faith” defence might need to be available if an employer decided not to comply with the regulations because he thought that it would be positively harmful to his employees but it is not a necessary addition to simply complying with the regulations. That is why I did not insert “good faith” into the amendment. It is about protecting employers from the possibly unintended consequences of compliance with legal obligations under Clause 10.
In Committee, I did not detect a massive difference of opinion between these Benches and those opposite except as to whether something needed to be put into the Bill. I invite the Government to reconsider their position on that and to give some welcome reassurance, preferably in the Bill, to the employer community, on whose shoulders the burden of implementation will fall. I beg to move.
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Baroness Hollis of Heigham: My Lords, I still have some of the hesitations that I had last time, although I have a lot of sympathy for the amendment. It is entirely reasonable that an employer should not be expected, let alone required, to give advice. That is a very tendentious area, and I think we all agree that straightforward information would be acceptable, particularly if the employer was a vehicle for other people’s information which might be provided by the Government, Citizens Advice or the Pensions Advisory Service, in which I declare an interest as a trustee. The good faith issue was not about testing the mind of the employer but about whether he—for these purposes I shall use the word “he”—had taken reasonable steps to ensure that the information that he was passing on to the employee was correct. Clearly, I would not expect the employer to take any responsibility for information that came from a third-party source—the DWP or Citizens Advice, for example—but if the employer decided to give information, I think that he would have a duty of care to act reasonably by ensuring that the information was correct and not misleading.
I was seeking to establish that an employer could not act recklessly. It could be the employer in a newsagent or a chip shop who has never been in this situation and decides casually to give information that is incorrect or misleading and, as a result, someone decides to opt out or possibly opt in when they should not do so. Therefore, I suppose that I was seeking to introduce a test relating to recklessness or reasonableness or whether someone has behaved appropriately. I do not have
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Lord Oakeshott of Seagrove Bay: My Lords, this is quite a tricky matter. I completely agree with the noble Baroness, Lady Noakes, that most employees will require advice but that that is not what they get from their employers and no employer should be in the position of giving advice. There is a clear distinction between information and advice, and I suppose that the problem arises if employees are given incorrect information. The more I think about this matter and the more I listen to the noble Baroness, Lady Hollis, the more I question how you tell the chip shop owner that he has been reckless, not reckless or reasonable. Sadly, I do not think those are workable concepts.
I shall listen with great interest to the Minister. What will happen if people give incorrect information? I do not think that going down a reckless route helps us. It may well be that, on balance, one has to go with the raw version from the noble Baroness, Lady Noakes.
Lord McKenzie of Luton: My Lords, I thank the noble Baroness for the amendment and for the opportunity to make our position absolutely clear on what is a very important issue. As I said in Committee, it has never been our policy contention that employers would be required to give advice to workers. The purpose of Clause 10 is to provide for regulations which will clearly set out the key pieces of factual information that must be provided to a worker as part of the wider automatic-enrolment joining process. Evidence suggests that the best means of getting some of that factual information to workers will be through the employer, as much of that information will be known only by the employer at the relevant time. By factual information, we mean, for example, the date of enrolment, details of the scheme and the amount of contributions being deducted from wages and paid over to the scheme. I believe that our aims in this regard are entirely consistent with the first part of the amendment tabled by the noble Baroness, Lady Noakes.
The Government’s position on employers and advice is absolutely clear and, therefore, we do not consider it necessary to put that in the Bill. That has been explained and, in Committee, where we differed was on whether it is necessary to provide employers with protection from any liability as a result of giving information to a jobholder or worker. We considered the issue and decided that there is minimal risk to the employer who complies with what is prescribed in regulations. The regulations will clearly set out what information must be given by the employer. As the employer will be required to provide simple and straightforward information and will not be expected to play any part in the decision-making process, we do not believe that an employer will be held responsible for an individual’s decision to save for retirement.
I appreciate that employers would welcome the reassurance that a safe-harbour provision would offer. However, I am mindful of the potential risks of such
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We need to consider carefully how offering employers a safe harbour will impact and interact with other provisions in the Bill. For example, we would not want to introduce accidentally an exemption to the Chapter 3 inducement provisions, nor would we want to provide protection to those employers who influence a jobholder’s decision to participate in pension saving by, say, over-inflating the amount of contribution to be deducted from wages, as the noble Baroness, Lady Hollis, said. Advice needs to be given properly, in a considered and accurate way.
If the noble Baroness does not press her amendment, I promise to return to this matter at Third Reading. I am conscious that we are stacking up a few issues for Third Reading, but I would like to give further thought to whether we can have a safe-harbour provision. I do not commit to being able to do that, but perhaps that might give the reassurance that employers want without giving carte blanche to those who would deliberately not wish to comply with proper information requirements.
Baroness Noakes: My Lords, I thank the noble Baroness, Lady Hollis, and the noble Lord, Lord Oakeshott, for their support in speaking to my amendment. I certainly thank the Minister for what he has said. The noble Baroness, Lady Hollis, raises some important issues about the responsibility of the employer. To some degree, it is difficult for us to debate this fully because we have not seen the draft regulations under Clause 10. We might well have a better fix on what we are talking about if we have an idea of what those regulations will contain. The Minister clearly has had some discussions with his officials on the content of those regulations. My concern is that the employer should not have to do too much; he should just hand over whatever is necessary because anything else would imply that he was acquiring a duty of care which the employer would not want to take. I can see, as we unpick the layers, that it becomes ever more complicated.
I am very grateful to the Minister for offering to take this away and I look forward to debating the issue again at Third Reading, I hope with an amendment, but if not I hope that the Minister can bring some clarity on the role of employers in relation to the information regulations. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Thomas of Winchester moved Amendment No. 16:
16: After Clause 10, insert the following new Clause—
“Duty in relation to provision of free independent generic advice
(1) The Secretary of State shall ensure that every jobholder aged 50 or over who becomes an active member of an automatic enrolment scheme under section 3 is also automatically enrolled to be offered free independent generic financial advice in accordance with subsections (2) and (3).
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(2) The advice referred to in subsection (1) shall be given, unless the jobholder chooses otherwise, in a face-to-face interview, and shall include integrated advice on the possible effects of pension contributions on the management of personal debt and the loss of means-tested benefits in retirement.
(3) The advice referred to in subsection (1) shall be provided by a trained adviser, and shall be made available in the parliamentary constituency where the jobholder has their main place of residence or employment.”
The noble Baroness said: My Lords, we on these Benches make no apology for the amendment being bigger and bolder than our similar amendment tabled in Committee. In the intervening two months since we last discussed the importance of free generic financial advice to be offered before auto-enrolment to those over 50, the landscape has changed, as the noble Lord, Lord Skelmersdale, said. More people are getting into financial difficulties. Housing repossessions are rising daily and jobs are being lost. Not only are some high-profile businesses going under, but all around the country many smaller businesses are in quite a precarious position. Many employees—and of course employers—are worried about their jobs and their futures. It is almost certain that the situation will get worse before it gets better.
So there is no point in thinking that what is happening to our economy is just a temporary blip and that in a few months’ time everything will be all right, with all the implications that that has for employees and for this Bill. This means that the offer of free financial advice to vulnerable groups before auto-enrolment in 2012 is even more important. After all, as has already been said today, employees who are auto-enrolled will see a dip in their wage packets just when they least want it.
There is general agreement that auto-enrolment is a good thing to overcome the inertia of jobholders about opting into an occupational pension scheme. But that surely means that there is a particular responsibility on the Government to take into account the inertia of those for whom it might not be the right course in their particular circumstances. One of the at-risk groups is quite possibly those in the second half of their working lives who have relatively low-paid jobs and mounting debts. Citizens Advice, which is conducting its own generic financial advice pilot, says that half of its inquirers are aged over 50 and that debt advice is at the top of what people need advice about.
Take Ron, aged 55, a carpenter who works for a building company and whose wife lost her job a few months ago. Let us say that it is a couple of months before the start of auto-enrolment in 2012. Rob remortgaged his house a few years ago to pay for an extension in order to accommodate his mother-in-law, who can no longer look after herself. He has cut down on all but the essentials. However, with no second wage coming in, he knows that he cannot afford to lose a single penny of his already precarious weekly wage. He has asked his boss about auto-enrolment, but he said that Ron will have to ask someone else as he does not want to get into trouble by saying the wrong thing.
Ron does not do websites and he is dyslexic, so he is not too good with leaflets either. The Minister will say that Ron has only to telephone the Pensions Advisory
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If Ron is lucky, he might find out that his local CAB can help him. Its Moneyplan service, which is being piloted now, aims to give free generic financial advice and will, I am sure, be able to add auto-enrolment to its competences. One of the advantages of that service is that clients can relatively easily be referred to benefits or debt experts within the bureau. However, if the CAB had to offer advice to every employee who wanted face-to-face discussions before auto-enrolment, it would be completely overwhelmed, unless it had a great many more trained advisers—something that we would very much like to see.
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I know that the Government are carrying out studies exploring what information should be offered and how. In particular, I understand that the Resolution Foundation is working on protocols to find unanimity on how the information should be framed. That is welcome, as far as it goes, but information is not enough and the amendment states that advice must be offered to people in this age range under the auto-enrolment scheme.
When the Minister replies, he will no doubt caution against that prescription being put into the Bill, as he did in Committee. However, our worry is that if nothing is put into the Bill, we will be left with vague promises that some sort of guidance will be available sooner or later. We are looking for a commitment that before auto-enrolment comes in, those aged over 50 will be offered free, comprehensive and face-to-face advice from independent financial advisers who understand the way in which personal debt, savings including pension savings, benefits and tax interact.
I understand that the Government fear that the offer of such face-to-face advice may look as though auto-enrolment has risks, but many people will be reassured to know that they can talk through their concerns with an independent adviser and that the advice is being offered simply because auto-enrolment is new. After all, in Committee, the Minister said:
“Of course there will be people for whom it will not pay to save”.—[Official Report, 17/6/08; col. 955.]
We expect that people who have no occupational pension plan will be happy with auto-enrolment in the vast majority of cases. However, if it is not the right course of action for even several thousand people, then the Government cannot be accused of pensions mis-selling if advice has been offered in the way that the amendment suggests. I beg to move.
Baroness Hollis of Heigham: My Lords, although I support the spirit of this amendment, the noble Baroness will understand if I have hesitations about some of the implications of its detail. She is absolutely right that, even before the implications for debt, the mortgage fears and the unemployment and benefits issues associated with the events of the past couple of months, most
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I again declare an interest as a trustee of TPAS, which has now published its report on the Women’s Pensions Helpline. It found that of the first 10,000 or so women who phoned in on the basic state pension—which is universal and, one might have thought, well known—almost all of whom were over 50, only 14 per cent knew that the state pension age for women is going to increase. Almost 75 per cent did not know that they could make additional voluntary national insurance contributions if they qualified, and 94 per cent did not know that they were not entitled to a basic state pension although they had paid the reduced married woman’s stamp. Those are three of the most elementary pieces of information about the basic state pension—that the age at which women can draw it is rising from 60 to 65 from 2010; that it is possible to make good your contributions, albeit to a limited degree at the moment, but I hope to change that; and that the reduced married woman’s stamp does not count. If that is the situation with the basic state pension, the situation will be even worse regarding private pensions—information about the interactions with benefits, whether one’s priority should be debt reduction, and what one should do when faced with increased pressure on income. The noble Baroness is absolutely right on all that. The widespread need is recognised by all the players, so to speak, in the field, from the CABs, the Resolution Foundation, TPAS, the Government and so on.
However, I have three hesitations about the amendment. Perhaps the noble Baroness can help us in her wind-up. The first is that she is talking about advice rather than information. Information is much more neutral and less obviously tailored to the individual, so it can be generic and much more easily provided. The Government have accepted—TPAS may well be prominent in that—the need to provide generic information. Advice seems to me much more difficult to provide because of the numbers involved, especially given that the noble Baroness, perfectly rightly, is specifying that the person should be trained, that the advice should be given face to face, that it should be local and that it should cover the full range of financial issues that may affect that individual.
The need to offer that service to possibly 1 million or 2 million people brings me to my concerns about cost, training and the provision of those advisers. I do not think that that is possible. I wish it were, but I doubt that it is, although we have a reasonably long lead-in time to 2012 and I suppose that one could begin the training activity over a period. Does the noble Baroness have any estimates of what costs might be involved? The cost of the financial advice to be provided is about £100 to £200 an hour per person face to face. Multiply that by two visits of one hour each by 3 million people and you see the sort of costs that we are talking about—they are huge.
I do not know whether the noble Baroness can help me on this. As I said, my heart is with her on the amendment but I find it difficult to see in practical terms how such a wide-ranging amendment can be delivered as she suggests.
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Lord Kirkwood of Kirkhope: My Lords, I wonder whether I can make a brief intervention in this important debate to support the case powerfully made by my noble friend Lady Thomas. I understand perfectly the position that has just been explained in her usual lucid way by the noble Baroness, Lady Hollis, but we will have to face up to this. I have no final costed scheme for the various elements in this important amendment, but my firm belief is that if we do not move to meet the requirements enshrined in it, we may risk the whole success of self-enrolment.
As I understand it, between now and 2012, the Government’s thrust is to try to get personal accounts established through auto-enrolment. Auto-enrolment is a big step. I absolutely agree with the noble Baroness, Lady Hollis, that we underestimate at our peril the amount of genuine ignorance—I do not use that word pejoratively, I mean genuine lack of knowledge and understanding of any of this stuff—across the landscape that the Bill is intended to cover. Small businesses will struggle with this throughout the length and breadth of the United Kingdom.
Big businesses are much better positioned because of the professional breadth and depth of advice that they have within their ranks. They are used to doing all this and it can be made easy for people in the employment of bigger businesses, but small, micro and family-sized businesses will struggle with this. If businesses struggle, so will the people faced with the important decision. Of course there are financial cycles and the scene that we are facing today may well have settled down by then, but the way that the amendment was presented was absolutely right: people, especially those on the lowest decile of household income, will run with fear from any prospect of their take-home pay being reduced unless someone is able to set the scene for them.
The noble Baroness is right; there is a world of difference between advice and information. For me, the amendment says that there needs to be something that interprets information. You cannot safely found on information; you cannot give a leaflet to someone who works in a joiners’ business somewhere in south-east Scotland and be safe in the knowledge that they will go away, read it diligently with a wet towel around their head over the weekend, or over the 30-day period, and come back with a sensible decision. They will not get to the first base of understanding what is being asked of them unless someone interprets that information.
Whatever else the House decides about this amendment, information by itself is not enough. For my money, if the Government could even get as far as saying that or saying that they will think about it, that would be enough for me, because we could then go on to the more important things such as the location, the format, and the qualifications of the people who are delivering this interpretation of the situation that is being faced by individual families and around which so much depends.
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