Automatic Enrolment (Offshore Employment) (Amendment) Order 2020
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Baroness Stedman-Scott
That the Virtual Proceedings do consider the draft Automatic Enrolment (Offshore Employment) (Amendment) Order 2020.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I shall speak also to the draft Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2020. I am pleased to introduce these instruments, which were laid before the House on 16 March, alongside my Written Statement of the same date setting out their purpose and effect. These instruments implement the conclusions of a 2018 statutory post-implementation review. The review concluded that automatic enrolment into workplace pensions should continue for eligible employees in the maritime industries, ensuring them access to a pension in the same way as workers in the rest of the UK economy. Subject to the approval of the House, the instruments will remove the sunset clauses contained in the original 2012 legislation so that it continues in force beyond the current expiry date of 1 July 2020. I am satisfied that the Automatic Enrolment (Offshore Employment) (Amendment) Order 2020 and the Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2020 are compatible with the European Convention on Human Rights.
Today’s debate relates to the operation of the automatic enrolment policy framework and will allow the Government to deliver on the conclusions of the 2018 post-implementation review, which recommended that seafarers and offshore workers remain within the scope of workplace pensions. As we are all too well aware, this is a difficult time for our citizens, our country and our economy. Many employers and workers face unprecedented challenges and trying their best to keep going and meet their legal obligations, including those relating to workplace pensions. The Prime Minister and the Chancellor have made clear that the Government will do whatever it takes to support workers and businesses as they deal with the impact of the coronavirus pandemic, and that no-one should be penalised for doing the right thing.
As part of the Coronavirus Job Retention Scheme, the Government have made available dedicated grant payments for the compulsory minimum employer automatic enrolment contributions for furloughed workers. We have prioritised this help so that businesses can better manage their fixed costs and to support the principle of saving for the future, which it is important not to lose sight of during the current crisis.
The Chancellor announced on 12 May that the scheme would be extended to the end of October. It will continue in its current form to the end of July, with changes to allow more flexibility introduced from the start of August. The Government have committed to provide more specific details on the next stage of the scheme by the end of May.
The Pensions Act 2008 and secondary legislation in 2011 brought most employers within the scope of automatic enrolment and placed duties on them with respect to qualifying workers in their employ. At that time, the Government decided to delay the extension of these duties to the maritime industries to allow time for resolution of complex issues relating to the operation of international maritime law and custom, as these impacted how the workplace pension reforms would apply to seafarers and offshore workers.
In 2012, following additional public consultation on the specific impacts of the policy on these industries, the Government introduced regulations and an Order in Council to extend automatic enrolment to all qualifying maritime workers. This legislation included a statutory requirement for a post-implementation review, as well as the inclusion of sunset clauses in the instrument, taking effect on 1 July 2020.
The post-implementation review was carried out in 2018. Based on the available evidence, the Minister for Pensions and Financial Inclusion concluded that automatic enrolment should continue to apply to all qualifying workers in this industry sector. This followed on from our automatic enrolment review in 2017, Maintaining the Momentum, which had confirmed that workplace pensions should be available to all eligible workers, regardless of who their employer is or the sector in which they work.
Looking specifically at the maritime industries, I should make clear that “seafarers” refers to people working on board ships or hovercraft. This does not include share fishermen as they are self-employed and, like all self-employed people, out of the scope of automatic enrolment because they do not have an employer. Offshore workers are, broadly speaking, those working on oil or gas rigs in the North Sea.
I have considered the need to include a review clause in the instruments before the House today. The success of automatic enrolment is based on pension saving being the default option for working people across all sectors of the UK economy. A new review requirement applying to only the maritime industries would be counter to the policy objectives of these reforms and would create uncertainty for employers in those sectors and their workers. I have therefore not included one. The Department for Work and Pensions will of course continue to work closely with employers, workers’ representatives and the pensions industry to keep the policy under regular review, as we do with all our policy initiatives.
I conclude by reiterating the crucial importance of these workplace pension reforms, which are helping millions of employees in the UK to save for their retirement. This includes an estimated additional 26,000 seafarers and offshore workers saving into a workplace pension in 2019 as a result of automatic enrolment. I commend these instruments to the House and I beg to move.
Baroness Stedman-Scott
My Lords, I thank noble Lords for their thoughtful and constructive comments, including those who issued a challenge to the Government. I remind noble Lords that in my opening speech I said that the Prime Minister and Chancellor have made clear that the Government will do whatever it takes to support workers and businesses as they deal with the impact of the coronavirus pandemic and that nobody should be penalised for doing the right thing. As the noble Baroness, Lady Sherlock, just asked, I will endeavour to answer as many points as I can. Where I cannot, I will write to all noble Lords with answers to their questions.
Let me clear up the issue of the Statement to the House. I think the best I can do for the noble Baroness on that is to go back and talk to the Minister for Pensions and the Secretary of State and come back to her.
The noble Baroness, Lady Drake, is so well respected in this field. She spoke about automatic enrolment and our commitment. We have made wage support available to assist all businesses across the regions and sectors of the economy. We believe that this is the best way to support businesses and their workers during the current crisis. The Government will continue to monitor closely the impact of workplace pensions on businesses during the current period. Our objective is to continue to support employers and to balance the needs of businesses and savers, while being mindful of wider economic factors.
The noble Lord, Lord McKenzie, and my noble friend Lord Bourne asked about numbers, as did the noble Baroness, Lady Sherlock. An estimated 29,000 workers in the maritime industries will be automatically enrolled into a workplace pension by their employer as a result of these instruments, and of them 26,000 will not opt out. This breaks down into 18,000 seafarers and 8,000 offshore workers. Across the whole economy, more than 10 million workers have been automatically enrolled into a workplace pension scheme. I will write to the noble Lord, Lord McKenzie, on the other points he raised and to my noble friend Lord Bourne on fiscal relief.
The noble Baroness, Lady Burt, asked why the sunset clause was in the legislation to start with, but the noble Lord, Lord McKenzie, answered my homework there quite well. It was done because there were still complex issues that needed to be addressed and it enabled the legislation to go forward. The noble Baroness also asked about cruise ships, as did my noble friend Lady Fookes. I will go away and get the up-to-date position and write to noble Lords with the outcome.
My noble friend Lady Anelay raised two important points. On the first, the DWP considered stakeholder proposals on the design of a specific ordinary working test for seafarers during the post-implementation review consultation. However, these proposals would have created additional administrative complexity for employers in the maritime industries. Additionally, treating workers in the maritime sector differently from other workers is contrary to the policy design of AE.
My noble friend also asked about employers that are charities and voluntary bodies. The maritime industries are a small sector compared to the overall economy and there is no direct data on the varying size and types of employers in these industries. Therefore, the DWP impact assessment for these instruments makes assumptions about the impact of workplace pension duties across different employer sizes in these industries, based on the broad level of employer contribution across the whole country.
My noble friend Lady Fookes talked about the nationality of some of the people in the maritime industry and the impact of these regulations. The nationality of the worker, and whether their employer is foreign based or owned, is not relevant; it is not an issue. On the point she made about consolidation, no change is taking place. The instrument removed the sunset clause from existing legislation, so it continues to apply. This could not be a more minimalistic approach to legislating.
At this point, I would like to pay tribute to the Seafarers charity, as other noble Lords have done, and to other charities that work in this field. They do excellent work and I place on record our thanks for this.
The noble Baroness, Lady Northover, said that we should put our arms around those who are struggling. That is absolutely what we are trying to do—and we will continue to do so. I cannot answer her question about BP in Angola, but I will write to her.
It would be career-limiting for me to tell noble Lords that nothing is going to change on automatic enrolment. I do not see it happening at the moment, but the fact is that, in these difficult days, we must tread carefully on all these big issues. But we must not lose the good work that we have done on this wonderful system.
My noble friend Lady Altmann raised the issue of women and pension schemes. The Government have taken action to protect people’s jobs and to support and pay wages. We took the decision to help ease the burden of workplace pensions for employers with furloughed staff, and this will help many women impacted by the lockdown to carry on their savings.
My noble friend Lady Altmann also raised pension relief, along with the noble Baroness, Lady Janke. Pension tax relief is a matter for the Treasury—I am not trying to duck responsibility. The Government recognise the different impacts of the two systems in pay and pension tax relief. To date, it has not been possible to identify any straightforward or proportionate means to align more closely the effects of net-pay and relief-at-source mechanisms for this population. However, as announced in our manifesto, the Government will publish a call for evidence on pension tax relief administration to see how we can fix the issue.
Turning to the noble Lord, Lord Blunkett, I think it is no bad thing to sometimes support the opposition if it means that our hearts are beating in concert to carry on with something important. He talked about finding ingenious ways to ensure that the entitlement continues: if noble Lords have ingenious ways, I hope that they will write and let me know what they are.
The noble Lord, Lord Purvis of Tweed, the noble Baroness, Lady Kennedy, and my noble friend Lord Blencathra talked about the oil industry. The noble Lord, Lord Purvis, gave an eloquent and clear overview of the challenges faced in getting the economy on the road as quickly as possible. The best thing that I can do is go back to my colleague the Minister for Employment, who is looking at this sector by sector, and perhaps fix up a meeting for the noble Lord and the Minister. I also challenge the noble Lord: if he has ideas, will he put them on paper and let us have them? We really do need this.
Reducing the trigger to include more women and low-paid workers was raised by the noble Baronesses, Lady Sherlock and Lady Kennedy, and the noble Lord, Lord Foulkes. The automatic enrolment earnings trigger determines the level of earnings at which someone must be automatically enrolled by their employer and is currently set at £10,000. This is reviewed annually, and an equality impact assessment always forms part of the review. We will continue to keep it under review as the country recovers from the impact of the coronavirus pandemic, but I will take the points made back to the department. I also want to put on record that I agree with the points made by the noble Lord, Lord Foulkes.
Regarding the triple lock, the Government are committed to ensuring that older people are able to live with the dignity and respect that they deserve, and the state pension is the foundation of that support.
The noble Lord, Lord Foulkes, again made the point about carbon fuels and alternative jobs. Obviously, this will feature in the work that we do to recover the economy. It is a tribute to those who work in that industry. We must do all we can to get the country working again as quickly as possible.
As my noble friend Lord Wei said, the job is not done. We must not take our foot off the pedal. I will take back to the department his point about people overseas being put off employing British people and will write to him. I believe that the point about multiple pensions will be sorted by the work that we are doing on the dashboard in the pensions Bill.
The noble Lord, Lord Hain, and the noble Baronesses, Lady Janke and Lady Sherlock, talked about the self-employed. We know that the current automatic enrolment framework is not suitable. That is why last summer we commenced trials working with a range of partner organisations to help inform future policy interventions. My noble friend Lord Flight raised many questions; I will answer one now and write to him on the others. The auto-enrolment review set out our ambition to remove the earnings limit and lower the age threshold in the mid-2020s. I am glad that my noble friend Lord Blencathra is pleased that we have brought the sunset clauses back to the House, but on the point about the review in five to eight years, there has never been any discussion on that, but I will find out, as requested. The noble Baroness, Lady Janke, asked about a timetable for pensions work. I will find out about this and write to her. I am sure that I have not answered all the questions, but I have done my best and will write to noble Lords.
Automatic enrolment has been transformational in getting employees into the habit of pensions saving. It has reversed the previous decline, and with over 10 million workers being enrolled into a workplace pension, automatic enrolment has by all measures been a great success. The workplace pension participation rate for eligible employees between the ages of 22 and 29 has increased from 24% in 2012 to 84% in 2018. Automatic enrolment has helped eligible women working in the private sector and raised the level of their participation from 40% in 2012 to 85% in 2018. Our ambition for automatic enrolment remains the same in relation to the 2017 review, but there is a need to reflect carefully on the current economic circumstances. It has been a huge success that we want to build on. As we have seen today, it is also important that we have the consensus to do so, so I welcome the support of noble Lords today.
As announced by the Chancellor on 12 May, the furlough and job retention scheme has been extended until the end of October. It will continue in its current form until the end of July; changes to allow more flexibility will be introduced from the start of August. This scheme is just one part of the Government’s response to coronavirus, which includes an unprecedented package for the self-employed, with loans and guarantees that have so far provided billions of pounds in support, tax deferrals and grants for businesses. The Government will continue to monitor closely the impact of workplace pensions on businesses during the current period. Our objective is to continue supporting employers and balance the needs of businesses and savers, as well as taxpayers, at this difficult time.
These instruments remove the sunset clauses from the existing legislation so that automatic enrolment into workplace pensions continues to cover eligible employees in the maritime industry, ensuring that these workers continue to have access to pension saving in the same way as the rest of the UK economy. I commend these instruments to the House. I beg to move.