Draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2018
Draft National Employment Savings Trust (Amendment) Order 2018
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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I beg to move,
That the Committee has considered the draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2018.
The Chair
With this it will be convenient to consider the draft National Employment Savings Trust (Amendment) Order 2018.
Guy Opperman
It is a pleasure to serve under your chairmanship, Mr Bailey. The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order aligns the lower and upper limits of the qualifying earnings bands for automatic enrolment with the respective national insurance thresholds of £6,032 and £46,350, ensuring stability and consistency in the way ahead. The order does not change the earnings trigger, which remains at £10,000. That strikes a balance between bringing in those most likely to benefit from pension saving with affordability for employers. The decision to maintain the alignment of the lower and upper earnings qualifying bands with those for national insurance contributions maintains simplicity and consistency and minimises burdens on employers.
The National Employment Savings Trust, commonly known as NEST, was established to support automatic enrolment by ensuring that all employers have access to a low-cost workplace pension scheme to meet their duties. NEST was specifically designed for and targeted at low to moderate earners and smaller employers that the wider pensions market had historically failed to serve adequately. It has a public service obligation to admit any employer that wishes to use the scheme to meet their automatic enrolment duties. It is a success. It has more than 6 million members, in excess of 554,000 participating employers and more than £2.4 billion of funds under management. All the measures in the order will improve the way in which the scheme operates for participating employers and members.
There are four minor and technical changes that I will briefly outline. First, there is a change to contractual enrolment. The order will make it possible for participating employers to enrol their workers in NEST whether or not the automatic enrolment duties apply to the employer. Secondly, the order will require the NEST Corporation to carry out research with scheme members and participating employers or their representatives in connection with the operation, development or amendment of the NEST pension scheme. Thirdly, the order will give NEST the ability to remove a member with an empty account from the scheme where certain conditions are met, including if the account has been empty for at least 12 months. These accounts are of no value to the member and incur administrative costs for other members. Finally, the order allows an individual to join NEST in the event of a bulk transfer with consent.
All the changes are deregulatory and positive for employers, but they are minimal. They are not expected to have a material impact and they will mitigate NEST scheme inefficiencies. I commend the order to the Committee.
Guy Opperman
I will address those points. In relation to my friend, the hon. Member for Birmingham, Erdington, it is fair to say that we all wish to have larger numbers of the self-employed signing up to automatic enrolment. That is a manifesto commitment by this party and it is being pursued. A number of pilot projects are on the go, and the hon. Gentleman will know from the debate we had on this particular issue last week that he is welcome to attend the two-day seminar at the Association of British Insurers on 26 March to explore the specifics of how we involve greater numbers of the self-employed. We will be using the private sector to assist us on that particular point.
In relation to the present limit of 8% of savings under automatic enrolment, it is entirely the case that we wish to get 8% over the next two years. However, we all accept that is not sufficient in the longer term and there is a commitment across the House of Commons to push beyond that 8%, because the savings required on a longer-term basis are clearly going to come to more than that.
The hon. Gentleman knows—and referring to the points made by the hon. Member for Aberdeen North—that the auto enrolment review that reported to the House in December last year set out the reasons why long-term considerations should include a reduction to the first £1 people earn, bringing the qualifying age down from 22 to 18, and addressing the lower earnings limit. I am pushing back on the consultation on that, given that there was a review throughout pretty much all of 2017 across the entire sector. We then received information independently from a number of different experts as to why we should go down to 18 and why we should start from the first pound.
The main objective for the Department and the Government is to ensure that the April rises in 2018 and 2019 proceed in the appropriate way. If the hon. Member for Aberdeen North feels that there has been insufficient consultation, I take that on board. I propose to look at the documentation and write to her in detail. I take on board her point that there has to be consultation in future. I believe that I can provide quite a detailed explanation and I am happy to do so in writing.
Question put and agreed to.
draft national employment savings trust (amendment) order 2018
Resolved,
That the Committee has considered the draft National Employment Savings Trust (Amendment) Order 2018.—(Guy Opperman.)