Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2021

Baroness Janke Excerpts

Thursday 25th February 2021 Lords Chamber

[Baroness Janke (LD) [V]]

My Lords, I thank the noble Baroness for her clear presentation. We will support the order today. I also thank all noble Lords for their contributions and feel that this debate has raised quite a few issues for her consideration.

Many noble Lords have commented on the fact that auto-enrolment has been highly successful. However, we know that, still, not enough people are saving for their retirement and that particular groups needs to save more. In the light of the success of auto-enrolment, could the Minister say what the timescale is for the Government to revisit the recommendations of the 2017 report, particularly in relation to the age threshold and earnings trigger? Several noble Lords raised the issue of the age threshold. Many of us would like to see young people eligible for auto-enrolment. They should be encouraged to make a start to their pensions, and there needs to be an incentive for them to start saving early in their working life.

However, as the noble Baroness, Lady Drake, explained, this age group is the hardest hit by the pandemic; can the noble Baroness comment on her proposal for special consideration for it, which I believe is definitely necessary? I also support her call and that of the noble Lord, Lord Bourne, for much more publicity and education about pensions and pension planning in the workplace.

By reducing the lower age limit to 18 and removing lower earnings limits, a further £2.6 billion could be saved, which would recognise the importance of starting this saving habit early. Although the pandemic has hit this age group hard, a government support initiative would definitely incentivise this group to think about its future.

The earnings threshold is also a barrier for many on low earnings to benefit from a pension. These are the working poor, for whom savings and pension provision will be crucial if they are not to move from being the working poor to pensioners in poverty. As the noble Baroness, Lady Ritchie, told us, 1.9 million pensioners are in poverty in the UK. In relation to the important points about fairness made by noble Baroness, Lady Wheatcroft, this group needs to be considered, and this will become increasingly pressing as we come out of the pandemic. I also cite her point about the small amounts of savings that many people have to help them survive and prevent them going into destitution.

The changes to automatic enrolment could also help to improve the pensions gender gap. The average pension pot for a woman aged 65 is one-fifth of a 65 year-old man’s, and women receive £29,000 less state pension than men over 20 years. This deficit is set to continue, all else being equal, only closing to 3% by 2060. Reducing the earnings threshold to a lower level would also bring hundreds of thousands of people, mostly women, into pensions saving.

I ask the Minister to comment on the latest ONS data, which show a stark contrast between the private pension wealth of white British savers and savers from ethnic minorities. What is the Government’s response to this data and what measures are they proposing to reduce the ethnicity pensions gap?

The noble Lord, Lord Davies, mentioned the judgment in the Supreme Court last week relating to employees in the gig economy. Like him, I ask what consideration has been given to the implications of that judgment, not just for Uber employees but for others in the gig economy. Have the Government made any assessment of how many other companies will be affected by the judgment and what action will be necessary?

I want lastly to highlight the self-employed, another group which is suffering particularly as a result of the pandemic. Recent research for the Institute for Fiscal Studies shows that only 16% of self-employed workers saved into a private pension in 2018, compared with 48% in 1998. The call made by the noble Baroness, Lady Ritchie, for a report on the impact of the pandemic on workplace pensions is therefore timely. What plans do the Government have to develop and implement policy for the self-employed to provide incentives to pay into a pension scheme to give them security in their old age? I look forward to the Minister’s response.