The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I beg to move,
That the draft Guaranteed Minimum Pensions Increase Order 2019, which was laid before this House on 16 January, be approved.
Mr Speaker
With this, it will be convenient to discuss the following motion:
That the draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2019, which was laid before this House on 16 January, be approved.
Guy Opperman
Thank you, Mr Speaker—what an introduction. I will not take the departure personally. With your permission, I will address both the orders at the same time.
The reality is that automatic enrolment is one of this country’s biggest and quietest success stories. It is a cross-party success story that has reformed private pension saving, with nearly 10 million people now signed up to a private pension. Our thanks are due to the 1.4 million employers up and down the country that have supported automatic enrolment.
Paul Masterton (East Renfrewshire) (Con)
I am very pleased by the development of automatic enrolment in East Renfrewshire, but while the Minister is at the Dispatch Box, will he take the opportunity to update me on the progress in relation to collective defined-contribution schemes?
Guy Opperman
The good news is that approximately 5,000 jobholders in East Renfrewshire are now benefiting from a workplace private pension, and our thanks are due to the 1,270-plus employers in my hon. Friend’s constituency.
On collective defined-contribution schemes—I know the hon. Member for Birmingham, Erdington (Jack Dromey), who speaks for the Opposition, is very passionate about them as well—I can confirm that, following the closure of the Government consultation on CDCs last week, the Government intend to proceed with CDC legislation, subject of course to the formal response to that consultation. It is right that I recognise on the Floor of the House the fantastic work my hon. Friend has done in bringing forward a ten-minute rule motion and then a private Member’s Bill to prompt and trigger the consideration of CDCs. This will play a massive part for the Royal Mail postmen and women who work in all weathers—I know there is interesting weather in East Renfrewshire—to support local businesses and the local economy.
The guaranteed minimum pensions increase order is a technical matter that is debated by this House on an annual basis. It provides for defined-benefit occupational pension schemes that are contracted out to increase members’ guaranteed minimum pensions that accrued between 1988 and 1997 by 2.4%, in line with the increase in the consumer prices index to the previous September.
The automatic enrolment order reflects the conclusions of this year’s annual review of the automatic enrolment earnings thresholds, as required by the Pensions Act 2008. In conducting the review, the Secretary of State has considered both the automatic enrolment earnings trigger, which determines the point when someone becomes eligible to be automatically enrolled into a qualifying workplace pension, and the qualifying earnings band, which determines those earnings on which the enrolled employee and their employer have to pay a proportion into a workplace pension.
Christine Jardine (Edinburgh West) (LD)
The Minister will know that the upper threshold is linked to the higher rate threshold for income tax. Will he explain to the House why the Government are prioritising this £1.3 billion tax cut for higher earners over reversing cuts to universal credit or ending the benefits freeze a year early?
Guy Opperman
The hon. Lady will understand that the trigger and the earnings limit are in line with national insurance figures. The level was £6,032 in 2018-19, which has gone up to £6,136. The upper limit was £46,350, which has gone up to £50,000. There will be more people saving by way of automatic enrolment by reason of these changes, and those enhanced by this will be numbered in the tens of thousands.
With respect, automatic enrolment is supported on a cross-party basis. It is a successful policy, with 10 million people in various constituencies up and down the country now benefiting from it. In February last year, the last group of smallest employers took on their duty to enrol all staff, and we now have 1.4 million employers. In April this year, we go to 8%, and individuals and employers will therefore be saving a substantial amount. The crucial statistic is that only 9% of individuals have opted out of, or ceased to have, an automatically enrolled pension on an ongoing basis.
Nigel Mills (Amber Valley) (Con)
I welcome the order. In considering the earnings trigger staying at £10,000—I note that that brings about another 40,000 people in, with an inflationary reduction—did the Minister think about the auto-enrolment review and the various recommendations that the trigger should be reduced to the lower earnings threshold, or should at least be extended so that someone could add up all their jobs to determine whether they qualified over that trigger? Is he tempted to make a change down to £6,000 or to a cumulative total, or is he thinking that next year, when we do not have to do the escalation, would perhaps be a better time to do that?
Guy Opperman
My hon. Friend asks his customary astute question, with his deep knowledge of this issue. The reality of the Government’s approach is that we wish to address the increase to 8%, get to April 2019, address the degree of opt-outs that follow from the increase to 8% and, at that stage, consider where we are. We have already had the 2017 automatic enrolment review, which agrees that the limit will go down to the first pound, and that we will go down from 22 to 18 in terms of the working population. The key point is that we should get to 8%; we should get this country up to a situation where we have ever larger numbers of people being not only part of automatic enrolment, but in a situation where they are up to 8%. That is possibly not the entirety of where we should be going, but, without a shadow of a doubt, it is a massive step forward.
Frank Field (Birkenhead) (Ind)
If I may follow the hon. Member for Amber Valley (Nigel Mills), who is a member of the Work and Pensions Committee, the Government clearly should be worried about people opting out when there are big changes. However, would the Minister and his Department argue to his colleagues from the Treasury, who are sitting just by him, that we could more profitably use some of the huge subsidies that go to higher rate taxpayers for their pensions to pay the contributions of those who are low paid?
Guy Opperman
I am in absolutely no doubt that my esteemed colleagues from the Treasury will be taking due note of the right hon. Gentleman’s advice and recommendations on pension tax relief, as he is the Chair of the Work and Pensions Committee. [Interruption.] They have encyclopaedic memories; they do not necessarily need to write particular words down, and they also have the benefit of Hansard. However, I am sure that the Chair of the Select Committee would agree that the primary purpose of auto-enrolment is to get to 8% and then to gain a proper understanding of where we are at that stage. There is a perfectly legitimate debate to be had across the House, on what is a cross-party policy formulated over 10 years, about where we then go in terms of employer contribution, employee contributions, the rates that one must go to and the tax relief that applies. That, I would suggest, is for another day. In those circumstances, I commend the orders to the House.