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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
My right hon. Friend makes a crystal clear point about the tipping point that we will all reach at a certain stage of our lives. Does he agree that a pensions dashboard that provides greater transparency and access, and a mid-life MOT whenever we judge our mid-life is—between our 45th birthday and our 50th birthday is the optimum time for that reassessment to take place—will address the point he rightly makes?
Stephen Crabb
I agree with everything my hon. Friend says. Pension freedoms are great, but we want people to be well informed and educated about the consequences of the choices that will be available to them, particularly when it comes to drawing down large cash lump sums from their retirement pots.
Low opt-out rates are part of the success story of auto-enrolment, but let us not be complacent about them. So far, contribution rates have been very low. Those rates will go up this April and again in April 2019. Despite all the positive effects of increasing the minimum wage and raising the personal allowance threshold for income tax, there will be people on lower incomes who feel a financial pinch in their take-home pay, and opt-out rates may increase as a result. I encourage the Minister to monitor what goes on in response to the increase in contribution rates and to be ready to reinforce the strong positive messaging about the importance of employers and employees sticking with their pension arrangements so that they do not see that increase as a reason to get energised and look at actively opting out of the system.
My hon. Friend the Member for Chippenham mentioned young people. I strongly welcome the Government’s indication that they will look to lower the minimum age threshold to 18, but why 18? If 16 and 17-year-olds are working and earning £10,000 or more, why should they not also be captured by auto-enrolment and benefit from it? No 16, 17 or 18-year-old should leave school without basic education in what auto-enrolment is all about and without being equipped to make good decisions.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I am delighted to respond to the important and timely debate introduced by my hon. Friend the Member for Chippenham (Michelle Donelan). She is right that this is the first time that this important issue has been debated in this Parliament since its introduction many years ago. This is an opportunity for us to air a variety of suggestions and ideas, which I will take on board. If I cannot address all the points she raised, I will definitely reply to her in writing.
It was kind of my right hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) to describe me in the way he did. It is a rare day that a Conservative Minister gets a good report from the Trades Union Congress, where I spoke yesterday. My only thought as I was listening to his speech was that things can only go down from here. It is also the case that, while I take all the compliments on the work we do as a Department—it is a team game, as any Minister will say—it is patently clear that the Chief Whip, should he wish to replace me at any stage, has available a number of capable personalities who have auditioned impressively today in their speeches.
We are considering auto-enrolment following the Government review in December 2017. I pay appropriate thanks to all the many people who contributed to it. It is certainly the case that we should start with unequivocal support for the hundreds of employers that have all made an amazing contribution. There are 1,250 in Amber Valley, 990 in East Renfrewshire, 1,860 in Horsham, 1,330 in Preseli Pembrokeshire and 1,590 in Chippenham. They have effectively been part of the change of the contract that exists between employee and employer. In my respectful view, that is utterly key going forward.
That new contract, much as we see in relation to the living wage, sees a change in the employee-employer relationship, and we need to make the case that the employer pays in when an individual pays in. More particularly, I believe it has led to greater staff loyalty, greater retention and greater commitment to those businesses. We should support and applaud that on an ongoing basis.
It is an amazingly exciting time for me to have been given this job. It is one that I asked for, and the Prime Minister kindly added financial inclusion to my ministerial title. It is clear that the Government are committed to all aspects of financial inclusion and addressing debt advice and pensions guidance, whether that is through making pensions simpler, more accessible and increasingly transparent through the pensions dashboard; or providing improved debt advice, pensions guidance and breathing space, and cracking down on cold calling, which we are doing through the single financial guidance body, which is being created by the Financial Guidance and Claims Bill, which will return for debate in the House in approximately 10 days; or pioneering the mid-life MOT and the developments in auto enrolments.
The hon. Member for North Ayrshire and Arran (Patricia Gibson) made several points. I briefly say that the independent review of the pensions system she requested was done by the Government in March 2017—John Cridland very kindly did it. It included looking at life expectancy. Pensioner poverty has also reduced significantly under successive Governments, to give credit where it is due. The hon. Member for Birmingham, Erdington (Jack Dromey) made the fair point that the Labour party would like a consistency of approach. This is an example of that and, with respect, the raising of the state pension age from 1993 onwards is an example of consistent pensions policy across all parties.
More than 1 million employers are now successfully providing workplace pensions. It is a good time to take stock, because we are seeing the end of the first phase of our reforms as we go forward into the second phase and bringing on board newly created businesses into our growing economy. There will be approximately 180,000 to 210,000 new employers each year that will need to comply with automatic enrolment duties. They will very much receive assistance from the Government and the independent Pensions Regulator in taking forward that process.
I make it very clear—I say this in every speech that I give—that we need to change the way in which this country views savings, pensions and investments. We need a situation in which we are unequivocally supportive of enhanced savings, pensions and investments. Auto-enrolment will clearly make a massive difference, and the rises that we will see will clearly make a massive difference to savings.
In the limited time I have, I will try to address some of the crucial points that have been raised. Much was said about why we are delaying the implementation of reforms, whether it is the lowering of the lower earnings limit or the £10,000 limit, until the mid-2020s. I take the strong view that it is my job, helping the Secretary of State and No.10, to ensure that the April 2018 and the April 2019 increases land without a hitch. They are the most important things that the auto-enrolment review identified and, more particularly, that we need to get right.
Provided we get those two increases right, we can then assess where we are. We can then allow for the lessons to be learned and push on to further phases. On phasing, it is entirely right, as everybody has said on a cross-party basis, that 8% is not sufficient to retire. We all accept and realise that. The Government are crystal clear that it is not the end of the matter. We wish to continue with the April ’18 and April ’19 increases, and once we have done those, we will assess where we go thereafter. Hon. Members should be under no doubt that there is an acceptance in all parts of Government that 8% is not sufficient for a long-term retirement. There are various examples from around the world. Australia is several years ahead of us, and has pushed into double figures. That is clearly the direction of travel in which we will go at some stage.
My hon. Friend the Member for Chippenham raised several questions, and I will try briefly to answer some of them. I have a couple of quick points on the self-employed. NEST has a public service obligation to ensure that employers always have a scheme available for automatic enrolment. That now applies to the self-employed, who can join NEST itself. The review that identified the significant number of self-employed people—4.8 million—very much made the case that we need to come up with ideas to address that. The pilot projects we are putting forward aim to do exactly that. As my hon. Friend will be aware, NEST is pioneering the sidecar product.
I meet a number of private sector providers. I will shortly meet Plum, and there are others—to use a BBC expression, alternative providers are available. Clearly, Moneybox, Plum and Chip, and all these very interesting private sector providers that give alternative savings options, can be utilised. We are looking at such companies with great interest.
More importantly than that, we are trying to be immensely proactive. There will be the self-employed hackathon. If the invite to that has not landed in colleagues’ inboxes as yet, they should come on 26 March when, working with the Association of British Insurers at its offices, we will explore ways forward and the assistance we can give to the self-employed. There is absolutely no doubt that we want to do that.