National Insurance Contributions (Employer Pensions Contributions) Bill

Debate between Baroness Altmann and Baroness Neville-Rolfe

Committee stage
Tuesday 24th February 2026 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I will speak first to Amendments 12 and 24, which would exempt small and medium-sized enterprises, charities and social enterprises from the salary sacrifice pension contribution cap introduced by the Bill. I also welcome Amendment 27, tabled by the noble Baroness, Lady Kramer, requiring a review of the ability of SMEs to recruit and retain staff.

Small and medium enterprises have been hammered under this Government. They have introduced policies that will cost businesses £25 billion annually in tax compliance alone, according to the firm Together Accounting. Their previous NICs hike added a further £25 billion burden and there are business rate hikes, minimum wage increases and the Employment Rights Act. Is it any wonder that 52 businesses per 10,000 are entering insolvency, nearly double the rate from just five years ago? The Federation of Small Businesses reports that 63% of businesses now cite tax as their primary concern. Business confidence has plummeted. This is something that I have spoken about many times, and the Conservative Party stands with small businesses. They are the lifeblood of our communities, our jobs market and our economy.

Our amendment tries to shield SMEs and charities from what is effectively yet another damaging tax by exempting them from this policy. Given the onslaught SMEs have suffered under the Government, the rationale for this needs little explanation. SMEs operate on thin margins, often without sophisticated accounting mechanisms or payroll and accounting teams. They will be disproportionately affected by this policy and should be exempt.

Turning to charities, before the Budget was even confirmed, the Charity Finance Group ran a survey of the sector specifically on the question of salary sacrifice. It found, and I urge the Committee to note these figures carefully, that 81% of charities reported that the salary sacrifice change would have a negative impact on their ability to offer competitive benefits to staff. Nearly seven in 10 had already started to reduce headcount or expected to do so in the near future, and that was before this further measure. It is not surprising that they are worried, as in my experience charities often have more complex employment arrangements: seasonal working, moving jobs, and weekly rather than monthly pay. They also often have much less sophisticated payroll systems.

CFG warned explicitly that, for charities operating on tight margins, salary sacrifice has been a critical tool and a way both to support staff and to achieve meaningful savings on employer national insurance at the same time, stretching limited resources further while enabling employees to build better pension provision. To cap that mechanism is to remove one of the few cost-efficient tools available to organisations that cannot increase prices, raise equity finance or easily diversify their income when grant funding or public contracts do not keep pace with costs.

The wider context of what has happened to charities under the Bill matters here, too. Last year, on Report, the House of Lords carried amendments to the then national insurance contributions Bill that would have protected small charities with revenues under £1 million from the main NICs rise. However, the Government rejected them, and we have seen what happened there. The Government have said that they want to build a stronger economy and a thriving civil society. That ambition is not well served by a policy that removes from smaller employers and civil society organisations one of the most effective tools that they have to compete for talent and support their people in saving for retirement.

Amendment 26 asks that, within 12 months of this Act coming into force, the Government commission and lay before Parliament an independent review of its impact on small and medium-sized enterprises, including administrative costs, compliance burdens, employment costs and the ability of SMEs to attract and retain staff—and, crucially, that this be assessed in the context of the cumulative changes to employer national insurance since July 2024.

Time and again, the Government’s approach has displayed a worrying lack of understanding of how small firms actually operate, how thin their margins are, how sensitive they are to cumulative costs and how easily confidence can be shaken. We saw it with the previous national insurance hike and in the rushed recalibration over pubs, and we see it all over again in this Bill and the rush to pass it when the vital detail is still to be settled. We know that the revenue collected will almost halve in the second year of implementation, so there will be lots of new compliance costs and an uncertain future.

If the Government are confident that this measure will not materially damage SMEs, they should welcome the opportunity to demonstrate that through an independent review. If they are serious about growth, entrepreneurship and avoiding further damaging U-turns, they should look at the cumulative picture. Given the scale of pessimism now facing the small business community and the stakes for employment and growth, I urge the Government to accept this amendment. SMEs do not trust the Government to act in their interests. If the Treasury were to adopt such an amendment—as well as the associated one for Northern Ireland, where there are so many SMEs—perhaps this trust might start to be rebuilt. I beg to move.

[Baroness Altmann (Non-Afl)]

My Lords, I have added my name to all of the amendments in this group. Again, I think that they are very important. I am pleased to have added my support for my noble friends Lady Neville-Rolfe, Lord Altrincham and Lady Kramer—if I may call her my noble friend—as well as for the noble Lords, Lord de Clifford and Lord Londesborough. All of them are picking up on the huge risks that are being posed in terms of additional administrative costs, burdens and complexity for small and medium-sized businesses, charities and social enterprises, which, as my noble friend Lady Neville-Rolfe explained, have already had so many extra burdens placed on them.

I reiterate that I hope that the Minister will recognise that we need this analysis and this type of work before we make the primary legislation that we are considering here, rather than afterwards. I also hope that, if the Minister does not have ready answers, modelling or analysis that would address the issues these amendments are trying to understand in more detail, we can, as we have heard before in Committee, put some of this on hold until we have a better understanding of what the real-world impacts will be.

Pension Schemes Bill

Debate between Baroness Altmann and Baroness Neville-Rolfe

Committee stage
Thursday 5th February 2026 Grand Committee

[Baroness Neville-Rolfe (Con)]

My Lords, I support my noble friend Lord Younger of Leckie in proposing a review of pension awareness and saving among young people.

When I had the honour to review the state pension age for the DWP in 2021-22, I was struck by two things that strengthened the case for better policy in this area. First, I found it much more difficult to get young people or their representatives, or indeed middle career workers, to engage in my review. Those who did were keen to keep pension contributions down and they did not believe the state pension would still be universal by the time they reached the retirement age of, say, 70. They were worried about buying a flat, as my noble friend has said, looking after their children and paying back their student loans.

Secondly, the level of financial education was dire. Schools were focusing well on human rights, the environment and ESG, which was discussed under the previous amendment, but not on pensions or financial management. They were not teaching the importance of early saving, the magical impact of compound interest, the value of a pension matched by the employer and the risk of new sources of profit like cryptocurrencies. Much more such education is needed in our schools but the Department of Education was resistant, partly because teachers are also often a little short on financial education. This is an important area and I am sure the Pensions Commission will look at it, but my noble friend is right to highlight what a big job we have to do.

[Baroness Altmann (Non-Afl)]

My Lords, I add my words of support to the concept being promoted by my noble friend Lord Younger. I hope the Government will look into this, as it might well be a good topic to task regulators with in making sure that either they or pension schemes themselves are helping people to understand pension schemes better, how they work and the free money that goes along with a pension contribution in terms of your own money. There is, as I say, extra free money added by, usually, your employer and other taxpayers. I do not think young people always understand just how beneficial saving in a pension can be relative to, let us say, saving in a bank account or an ISA, or indeed the value of investing. It would be in the interests of the regulators and, indeed, the providers to help people to understand that. The Government’s role in guiding that and setting up this kind of review could be very valuable.

Pension Schemes Bill

Debate between Baroness Altmann and Baroness Neville-Rolfe

Committee stage
Monday 26th January 2026 Grand Committee

[Baroness Altmann (Non-Afl)]

My Lords, I, too, have a number of amendments in this group and I will address my remarks mainly to them. Amendments 99 and 106 recommend removing the specific figure of £25 billion from the Bill and replacing it with a figure to be determined by the Government nearer the time, I hope, after detailed consultation.

On the last day in Committee, when we debated Amendment 88 on small pots, in the name of the noble Baroness, Lady Noakes, which proposed a monetary limit of £10,000, the Minister rejected the amendment on the grounds that

“the Government are not persuaded that it is sensible to hardwire the cap in primary legislation”.—[Official Report, 22/1/26; col. GC 188.]

Quite right. The same applies here: my amendment follows exactly that principle. I am concerned about the risks involved in tying primary legislation to a fixed monetary sum.

First, a change in market conditions could render it inappropriate. Secondly, such a large sum risks stymieing the development of newer companies and gives an exceptional competitive advantage to those providers already of the required scale. There is no evidence—I have been searching—to suggest that big is always best and there is certainly no academic proof that £25 billion, £10 billion or any other number is the right dividing line between successful funds and failing funds.

Newer entrants with an interesting approach to member service, digital engagement or innovative investment may well take time to break into the market, but just because they have not reached what the Bill determines is the magic number should not mean that they are forced to close, which is what the Bill would do, in effect.

The Minister said that consolidation and scale will mean

“better outcomes for members … lower investment fees, increased returns and access to diversified investments, as well as better governance and expertise in running schemes”.—[Official Report, 22/1/26; col. GC 202.]

That may well be the case for many, but deliberately disadvantaging innovation and putting up barriers that damage recent or newer entrants, regardless of their merits, runs counter to those intended outcomes over the longer term. Using collective vehicles, for example, run by already established experts such as closed-ended investment companies, can replace the need for in-house expertise at each of the big pension funds. Indeed, that option is already available but is being discouraged by the Bill.

As the noble Baroness, Lady Noakes, said, a correlation is not the same as a causative impact. Putting £25 billion into the Bill creates a big issue with some of the newer companies that will fall into the vacuum between the new entrant pathway, which does not start until a scheme is established after 2030, and the transitional pathway, which requires this fixed £10 billion—I could have tabled amendments on that, but £25 billion is the same principle—if they have not reached that level.

What is worse—I tried to indicate this last week—is that, although I know that the Government want to inject certainty by including these numerical figures, unfortunately they are also blocking the progress and potentially forcing the closure of a number of schemes that have digital-first methodologies right now but have not been established long enough to reach the required scale and to which the market to raise growth capital is currently shut. Who would lend money to a newer company that may or may not reach the scale required by the particular date?

The Government need to think again about the merits of using a fixed number, as the Minister mentioned last week. I would be happy to meet officials or Ministers to go through the rationale that has had this damaging effect in the market. I hope that we will not give a hostage to fortune by specifying a particular number in the Bill that may or may not prove to be right, wrong or damaging. I hope that the Minister will help the Committee to understand whether the Government might consider this principle.

[Baroness Neville-Rolfe (Con)]

My Lords, I support Amendments 91 and 95 in the name of my noble friend Lady Noakes, to which I have added my name. I apologise for not being able to contribute to the Committee’s discussions on Thursday because of competing business on the Floor of the House. I have read Hansard and I should record that I share the reservations expressed about mandation, a subject on which I have received many well-argued requests and emails. I commend the arguments that have been well put by my noble friend Lord Younger of Leckie on the amendment from the noble Baroness, Lady Bowles. I particularly dislike powers delayed into the future. If the Government decide that they need to legislate later, they can bring in another Bill that the House can scrutinise in the light of contemporary evidence.

I turn to the amendments in this group, so well argued by my noble friend Lady Noakes. I am uneasy, as others are, about the overemphasis on creating size and scale in the Bill: £25 billion is a big fund and, as my noble friend Lady Altmann said, it does not seem to be well evidenced. It is a Labour trend that needs to be treated with some scepticism. We see it in local government reorganisation, in rail nationalisation and now in the proposals for the police. I know from my business experience, which noble Lords know I always come from, that mergers of any kind always have substantial costs and that you need smaller, pushy innovators to keep sectors competitive. This might be contentious, but Aldi was good for Tesco because it kept us on our toes—and even better for the consumer, the equivalent of the saver in this case. The point is that reorganisations of any kind always have costs and only sometimes have benefits.

We have seen the growth in recent years of money purchase funds that are almost entirely digital, and they have brought beneficial competition to the market. We risk eliminating the next generation of innovation, real value creation and indeed British unicorn funds, generated by competition, if we leave the Bill as it is.

We must not allow good performers to be snuffed out by the movement to bigger schemes. That is why we are asking the Minister to look at excluding master trusts and group pension plans that deliver good investment performance from the scale and size requirements. Performance is, after all, what matters to those saving for a pension. Size, scale and growth are not everything, popular though they tend to be with the fund managers who benefit. Returns matter more, but the Bill at present rather underplays them in favour of scale. My noble friend Lady Noakes’s amendments are just what is needed, and I look forward to hearing how the Minister is going to solve the problem that she has identified.