Pensions Regulator (Employer Resources Test) Regulations 2021
Baroness Janke Excerpts(3 years, 2 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I am pleased to introduce this instrument, which was laid before the House on 28 June 2021. Subject to approval, these regulations provide essential details on the new employer resources test that was introduced by the Pension Schemes Act 2021 in connection with changes to the contribution notice regime.
The new employer resources test will enable the Pensions Regulator to overcome existing challenges of assessing the “act” or “failure to act” that has affected the financial strength of the sponsoring employer, and therefore its ability to support the scheme, rather than damaging the scheme directly.
These regulations outline that the profit before tax measure will be used to assess the resources of the employer. This measure is widely known and understood by the industry and gives the most appropriate picture of net profits available to provide support for a defined benefit pension scheme. The regulations set out specifically how the value of the resources of the employer is to be determined, calculated and verified.
I am satisfied that the provisions in the regulations are compatible with the European Convention on Human Rights.
Part 3 of the Pension Schemes Act 2021 strengthens the powers of the Pensions Regulator. It fulfils our manifesto commitment to take action against those who think they can plunder the pension savings of hard-working employees. These regulations provide essential details on the new employer resources test which forms part of the Pensions Regulator’s contribution notice regime. This regime enables the Pensions Regulator to demand that money is paid into a pension scheme from those found to have caused it detriment. A recent example is Dominic Chappell, who was ordered by the Pensions Regulator to pay £9.5 million into the British Home Stores pension scheme.
The new employer resources test, which these regulations relate to, will enable the Pensions Regulator to overcome existing challenges of assessing the “act” or “failure to act” that has affected the financial strength of the sponsoring employer and therefore its ability to support the scheme rather than damaging it directly.
With these new provisions, we will also avoid the associated challenge of having to project into the future to assess the likelihood of members receiving their accrued benefits. The purpose of the employer resources test is to provide the Pensions Regulator with a tool to make a simple snapshot assessment of the impact of the act or failure to act on the employer at the time. This allows for the act or failure to act to be assessed on its own terms, relative to the employer’s current potential exposure to the scheme, rather than an assessment of what could happen in future. Assessing whether the act or failure to act has reduced the value of the employer’s resources is just one part of the wider employer resources test. The Pensions Regulator, in addition to looking at the health of the employer, also has a focus on the scheme, where it is required to assess whether the reduction of the employer’s resources was material when compared to the scheme’s estimated Section 75 liability.
On the specifics of these regulations, what constitutes the resources of the employer is determined as being the employer’s profits before tax. This is a widely known and understood measure used by the industry and gives the most appropriate picture of net profits available to provide support for a defined benefit pension scheme. How the value of the resources of the employer are determined, calculated and verified are set out in these regulations. The general approach assesses the annual profit before tax position of the employer had the act or failure to act not occurred, which is then compared to an assessment including the act or failure to act. An adjustment is then applied to the profit before tax position that represents the impact which is expressed as a pound figure. The calculated figure would then be assessed against the scheme’s Section 75 debt immediately before the act or failure to act occurred. When the employer resources test has been met, the Pensions Regulator will follow the existing contribution notice process, whereby it will consider other factors, including the reasonableness of issuing a contribution notice.
Working in tandem with these regulations is the Pensions Regulator’s code of practice, which aims to provide further clarity to the industry on how it will interpret and use the powers. The Pensions Regulator launched a consultation in May 2021 on its contribution notice code of practice, which included clear examples covering scenarios of how the different tests would apply. The consultation concluded in July, and the Pensions Regulator is reviewing the responses with a view to publishing the code later in the year.
In closing, we remain committed to ensuring that there should be no hiding place for those who put workers’ retirement savings at risk, and these regulations will play a vital role in enhancing the Pensions Regulator’s ability to take action to protect pension scheme members. I commend this instrument to the Committee and beg to move.
Baroness Janke (LD)
My Lords, enabling the TPR to use contributory notices more widely to correct any detrimental action or failure to act is very welcome. However, I have a few questions about the method chosen for defining employer resources.
The Explanatory Memorandum refers to other methods being considered— EBITDA, or earnings before interest tax depreciation and amortisation, and a holistic measure based on covenant strength—but they were dismissed. Can the Minister explain why they were rejected, particularly the holistic assessment based on covenant strength? She will be aware that in very large university superannuation schemes, the level of contributions is affected by covenant strength. Can she explain why a snapshot of net income or profit before tax provides a better approach than this? If the snapshot route is to be followed for defining employer resources, what about the strength of employer assets? What part do they play in any assessment? I also question whether it is reasonable to allow the TPR absolute discretion in determining what are or are not exceptional or non-recurring items. I would welcome the Minister’s clarification on these points.
Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations 2021
Baroness Janke Excerpts(3 years, 2 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, I am pleased to introduce this instrument, which was laid before this House on 21 June. Subject to approval, these regulations will continue the Government’s reform of occupational defined contribution—DC—pension schemes and prepare them for the opportunities that lie ahead.
With more than 10 million workers now saving for retirement in an occupational pension thanks to the success of automatic enrolment, we want these savers to achieve the best possible outcome in retirement. These regulations put improved member outcomes at the centre of the defined contribution occupational pensions market in the UK and ensure that the best interests of pension savers are driving the administration, governance and investment strategies of schemes.
By introducing a new “value for members” assessment for schemes with less than £100 million in assets and which have been operating for at least three years, we will ensure that members are not languishing in poorly governed and under-performing schemes. By requiring the trustees of certain occupational DC schemes to publish information on the performance of their investments for the first time, we will ensure that competition on overall member value replaces a narrow focus on cost.
By allowing occupational DC schemes to smooth performance fees over a multi-year period within the charge cap, we will make it easier for trustees of such schemes to pay higher fees for products where they have evidence that this will provide greater returns to members.
The Government are committed to building on the success of automatic enrolment with a consolidated, innovative, member-focused market for saving in occupational DC pension schemes. These regulations take significant action to this end. I am satisfied that the Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations 2021 are compatible with the European Convention on Human Rights.
Occupational defined contribution schemes, or DC schemes, are the future of occupational pension saving. The Government are committed to ensuring that the DC market in this country can continue to grow and deliver the best possible outcomes for the millions of workers now saving in a DC scheme. These regulations take forward several measures which amend a number of existing sets of regulations. The first of these, which is made by Regulation 2 of this instrument, is the introduction of a new “value for members” assessment for occupational DC schemes with less than £100 million in assets. While there is currently more than £100 billion of pension savings in occupational DC schemes, this is split among more than 3,000 schemes. This system risks inefficiency and creating inequality. For example, some people, as a result of the scheme their employer chose, possibly years ago, may be getting a lower return on their savings, paying higher charges or having a worse customer experience, therefore limiting their engagement with their pension and outcomes in retirement. We aim to change this.
That is why this instrument amends the Occupational Pension Schemes (Scheme Administration) Regulations 1996 to require trustees of relevant schemes, a term which covers most occupational DC schemes, with less than £100 million in assets and which have been in existence for at least three years to conduct an annual assessment of the value that the scheme offers to its members. The regulations specify the criteria that must form part of this assessment. They include the quality of the scheme’s record-keeping, the promptness and accuracy of administration and the extent to which existing requirements in the Pensions Act 2004 concerning trustees’ knowledge and understanding are being met.
However, the most important aspect of this assessment is the comparison between the scheme’s net investment returns, ie the performance of its investments less costs and charges, relative to three larger schemes. Larger schemes are likely to be better governed and to achieve greater investment returns than a smaller scheme with limited expertise, capacity and budget. We expect that the majority of schemes will not perform favourably in this test.
Regulation 3 of this instrument requires schemes to report to the Pensions Regulator the outcome of this “value for members” assessment. If schemes in scope determine that they do not offer value for members, Regulation 3 of the Register of Occupational and Personal Pension Schemes Regulations is amended by these regulations to require such schemes to inform the Pensions Regulator of whether they intend to wind up the scheme or to explain the reasons for not doing so and the immediate improvements that will be put in place. These measures will encourage a quicker pace of consolidation in the occupational DC pension schemes market and help members who are stuck in schemes that are delivering sub-optimal retirement outcomes for them. Scheme consolidation is a priority for DWP so that members are able to benefit from the economies of scale and access to a diverse range of asset classes that larger schemes bring.
The other measures in this instrument aim to broaden the range of asset classes available to occupational DC schemes. At present, occupational DC schemes are primarily invested in traditional assets such as listed equities and bonds. Only a small number of the largest schemes are accessing so-called illiquid assets, such as infrastructure, property, private credit and private equity. These illiquid assets have the potential both to diversify an investment portfolio and deliver greater returns. As a result, Regulation 2 of this instrument amends Regulation 23 of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 to require occupational DC schemes to report, for the first time, the return on investments after deduction of any charges or transaction costs, known as net investment returns. We believe that members deserve to know how their investments are performing and how they fare relative to other schemes.
This will also catalyse competition between pension providers not just on cost but on overall value. Employers, consultants and members should be able to assess a scheme based on this metric, and competition should incentivise trustees of occupational DC schemes to explore illiquid assets and other innovative investment strategies. This is essential given that net investment returns have a much greater effect on retirement outcomes than whether a scheme charges its members 0.3% or 0.4%.
Both these measures, the new “value for members” assessment and net investment returns reporting, have been introduced alongside statutory guidance entitled Completing the Annual Value for Members Assessment and Reporting of Net Investment Returns, which will help trustees of schemes that are in scope to meet these requirements.
Finally, this instrument makes additional changes to regulations to improve governance of occupational DC schemes. All occupational pension schemes will be required to report on the total assets of the scheme annually to the Pensions Regulator at the scheme year end.
The changes to regulations in this instrument will also require schemes to produce costs and charges illustrations for all funds and not just those currently available. They will exempt wholly insured schemes from some governance requirements and ensure that occupational DC schemes “with a promise”—a small number of schemes that contain a commitment to members—report on their statement of investment principles to those members.
In conclusion, the measures in this instrument offer opportunities to improve member outcomes and help prepare the occupational pensions market for the challenges that lie ahead. I therefore commend the instrument to the Committee and beg to move.
Baroness Janke (LD)
My Lords, we certainly agree with the policy aims and mechanisms of this instrument and endorse the Government’s actions to make sure that
“members do not languish in sub-optimal arrangements that do not meet governance requirements and are unable to take full use of investment opportunities, to the benefit of the end saver’s eventual retirement outcome”,
as the Explanatory Memorandum states.
As the Minister has said, paragraph 7.6 of the Explanatory Memorandum explains that Regulation 2 requires that schemes holding assets worth less than £100 million and which have been operating for three or more years are to compare charges, transaction costs and the return on investments with three other schemes. We are not clear how those schemes are to be selected and who is to select them. Is it the trustees, for example? Are there selection criteria other than that they have assets of more than £100 million and are personal pension schemes? If it is not the trustees, who selects the comparator schemes?
Paragraph 7.8 states:
“Where the trustees have reported that the scheme does not provide good value for members, they are also required to report whether they propose to wind up the scheme and transfer the members’ rights into another scheme or explain to TPR why … not … and what improvements they are planning to make.”
What happens if these improvements are not acceptable to the Pensions Regulator and what powers does the regulator have based on compliance or non-compliance with Regulation 3?
We would probably all agree that it is a good idea to encourage smaller funds to transfer rights or improve if Regulation 2 comparisons show poor performance, but what about larger funds? Should there not be a requirement for them to undertake the same comparisons and take the same actions if their schemes show poor value for money for their members? It is easy to see why small funds should be encouraged in this way but hard to see why larger firms are not similarly encouraged. I would welcome the Minister’s clarification on these points.
Baroness Drake (Lab)
My Lords, I refer to my entry in the register of interests, particularly as trustee of a large master trust and the Telefónica pension scheme. I thank the Minister for the clarity of her explanation. It is a pleasure to talk face to face, rather than digitally, for once.
Of the three main provisions in these draft regulations, one requires smaller DC schemes with less than £100 million to demonstrate overall good value. If they cannot, the expectation is that they will wind up and consolidate into another scheme. The regulations also require schemes to take their net investment returns and increase flexibility to take account of performance fees when calculating the 0.75% pension cap on pension savings.
I support the focus on smaller schemes and the drive to consolidate them into larger schemes. The TPR evidence reveals that many smaller schemes struggle to match the governance, investment opportunities and charges delivered by schemes operating at scale, but the Minister’s aspirations are high. I quote Guy Opperman, who wrote:
“It is not my intention to stop at £5 billion”,
and that
“There is no doubt in my mind that there must be further consolidation”,
and that
“further action will follow”.
However, even a threshold of £5 billion goes beyond small and will catch all but the very largest of DC schemes.
The Minister believes that consolidation drives better member outcomes, a view again with which I agree, and I accept that scale matters. The Minister wants to understand the barriers to further consolidation through two lenses. He stated:
“I am particularly keen to understand how the creation of greater scale in the DC market can benefit members through economies of scale and access to alternative investments.”
However, the Government have to recognise that they created some of those barriers, even though the case for scale was well documented at the time. When auto-enrolment was introduced, they took the view that there should be an open market with virtually no barriers, or few barriers, to entry, with the inevitable proliferation of provision and the acceleration of small pot numbers that followed, which made decisions for employers even more complex. The transfer of the cost of market failure on to the members of the growing number of poorly regulated master trusts was eventually recognised and led to the new authorisation regime. At the start of that authorisation regime there were 90 master trusts; 37 were granted authorisation, a reduction in the overall size of the market by 58.8% in a little over a year, perhaps an indication of how inefficient the original policy had been. Is it anticipated that the drive to accelerate the consolidation of schemes will lead to a further reduction in the number of authorised master trusts? Will the TPR be expected to modify its approach to the authorisation criteria? Given the Minister’s aspiration and the Government’s drive for greater consolidation, what do they consider would be the optimal outcome in terms of the number of schemes? How do they define optimum scale in terms of assets under management?
The Government’s policy that consolidation into fewer and larger DC schemes will facilitate greater investment into a wider range of assets and bring benefits to scheme members and the UK economy was captured in the letter of 4 August from the Prime Minister and Chancellor, entitled Igniting an Investment Big Bang: A Challenge from the Prime Minister and Chancellor to the UK’s Institutional Investors. They called for the need to,
“seize this moment … to unlock the hundreds of billions of pounds sitting in UK institutional investors”—
particularly pension schemes—
“and use it to drive the UK’s recovery”,
and growth. They added that the Government were,
“doing everything possible—short of mandating more investment in these areas as some have advocated—to encourage a change in mindset and behaviour among institutional investors, and we remain open to addressing further barriers”.
Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021
Baroness Janke Excerpts(3 years, 4 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Janke (LD) [V]
My Lords, like the noble Lord, Lord Davies, I very much support this statutory instrument and welcome the measures that the regulations introduce. As has been said, the statutory instrument introduces new requirements for trustees of certain occupational pension schemes to make sure that these schemes are conducted with respect to the effects of climate change. Also, there is a requirement for reports to be published and powers given to the Pensions Regulator to ensure compliance.
These measures were widely supported during the passage of the pensions Bill; I echo the thanks of the noble Lord, Lord Davies, to the team who put so much work into them. They are much-awaited first steps, however, and we hope that they will have a far-reaching effect throughout the industry and the financial sector. Trustees and fund managers will need to become very knowledgeable about the financial risks of climate change and matters relating to it, and more particularly about the targets in the Paris Agreement. As a former trustee I must say that, for many, there will be a steep learning curve in being able to manage the requirements of these regulations. There is a reference to respondents who expressed concerns on the availability of data, key to climate change, in the notes on the consultation—the data will, of course, be important. The Minister said that there is plenty of data; there is, but the analysis of it will be demanding.
Trustees and fund managers will need a range of information to discharge these duties. What information will be made available about, for example, the eligibility of companies for investment? Has any progress been made about disclosure requirements on companies for current greenhouse gas emissions, and the projected impact of their business plans, assets and activities on future emission levels? Are there plans, for example, to create a register of low and zero-carbon investment opportunities at all levels of the investment chain, making it easier for everyone—from asset managers to pension fund managers and individuals—to understand the green options available and provide opportunities to promote and invest in innovation and creativity in green industry and commerce?
The finance sector needs to operate within a framework that steers resources into climate-friendly investments and away from climate-negative activities; for example, avoiding support for investments that may become stranded assets through activities such as opening new oil and gas fields or coal mines, which cannot operate in the long term and therefore will not deliver returns to investors if the net-zero target is to be met. This requires a series of actions by government and financial sector regulators, ensuring better flows of information about climate risks and green investment opportunities for investors, lenders, insurers and other stakeholders, while providing the impetus for the financial sector to play its part in driving the action that reflects risks and opportunities in combating climate change and creating a low-carbon economy. I look forward to the Minister’s response.
Covid-19: Work-related Cases
Baroness Janke Excerpts(3 years, 4 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Stedman-Scott (Con)
The Health and Safety Executive guidance, with advice from the Government Legal Department, does not exclude the reporting of cases of workers whose job involves dealing with the public. RIDDOR places a duty to report on the employer, and they must make a judgment based on the information they have. The Health and Safety Executive has never publicly stated that Regulation 9(b) or its supporting guidance has been misapplied.
Baroness Janke (LD) [V]
Does the Minister recognise that the severe cuts to the HSE have led to fewer inspections and, as a result, more underreporting? What plan do the Government have to reinstate the HSE budget?
Baroness Stedman-Scott (Con)
I am pleased to say that the Health and Safety Executive has had additional funding throughout the year along with enormous staff increases. This will continue to be worked on, and the HSE and the DWP continue to review and revise the resourcing arrangements as necessary.
Armed Forces: Transition to Civilian Life
Baroness Janke Excerpts(3 years, 4 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Janke (LD) [V]
Can the noble Baroness say what specific support is provided for families—particularly children—of members of our Armed Forces to enable their transition, given that many of them will have spent time in different schools and different locations and may find it difficult to transition after their families leave the services?
Baroness Stedman-Scott (Con)
The effect on children living in different parts of the country and the world, and the number of schools they have attended, is well known. It is for the MoD to carry out this activity in its resettlement programme. I will ask my friends in the Ministry of Defence to write to the noble Baroness with more detail.
Unemployment: Over-50s
Baroness Janke Excerpts(3 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Stedman-Scott (Con)
To help and support carers to remain in work or return to work, we have been working with employer organisations, the CIPD, the British Chambers of Commerce and LEPs to host a series of webinars, with content delivered by the business champion for older workers. We absolutely agree with the noble Baroness about the role that carers play. We want flexibility from employers, flexibility in hours and flexibility in the roles that those people can provide.
Baroness Janke (LD) [V]
My Lords, older workers have valuable experience and life skills but are twice as likely as younger workers to be out of work for 12 months or more. What opportunities for financially supported training and education will the Government make available to this age group to enable them to develop their skills and, if necessary, change their career paths?
Baroness Stedman-Scott (Con)
Again, the noble Baroness makes an important point about the value that older workers can add to the workforce. The UK Government are investing £2.5 billion in the national skills fund to aid the lifetime skills guarantee. This is a great opportunity for older workers.
Pension Credit
Baroness Janke Excerpts(3 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Stedman-Scott (Con)
On the last point that the noble Baroness raises, I am happy to go back and find out the information. I will write to her and place a copy of my letter in the Library. I emphasise that our meeting with stakeholders in early May will include energy companies. I will certainly take her idea back to the department.
Baroness Janke (LD) [V]
Does the Minister believe that take-up campaigns fully involve local agencies, such as the charitable and voluntary sector and more particularly local government, which provide many essential services for older people? What plans are there for further involvement of such local agencies in future take-up campaigns?
Baroness Stedman-Scott (Con)
I reiterate that we continue to make best use of all the available channels to make sure that we can reach those people and confirm to them their eligibility, particularly family and friends. I am not aware at the moment of anybody making a suggestion about local agencies, but through our stakeholder engagement we have certainly raised this point. I will take back the local government issue to the department.
Covid-19: Universal Credit
Baroness Janke Excerpts(3 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Stedman-Scott (Con)
Legacy benefits and the £20 uplift have been the subject of lengthy and great discussions in the department. To be absolutely straight and truthful, the only thing I can say is that the Government have no plans to extend the temporary £20 uplift. I know that that will be a disappointment.
Baroness Janke (LD) [V]
My Lords, further to the question of the noble Baroness, Lady Primarolo, I draw to the Minister’s attention the fact that many people still on legacy benefits have had their finances hit hard by the pandemic. The need to reduce health risks, such as by taking taxis to appointments to avoid public transport, purchasing more PPE for those with respiratory conditions and using more heating to reduce the risk of complications from Covid-19 all incur high costs. In previous questions, we have heard that the costs of disability and sickness are considerable, particularly to people who have little at the moment and are on legacy benefits. I know that the Minister has answered by saying that the Government have no commitment to add the £20 uplift to legacy benefits, but will she commit to looking into the circumstances of people on legacy benefits and their carers—disabled people, particularly—to see what action can be taken to improve their circumstances?
Baroness Stedman-Scott (Con)
I give an assurance to the noble Baroness that I will speak to her in more depth about the points she raises. Once I have done that, I will of course go back to the department and talk to those there.
Commonwealth Countries: Reciprocal Pension Agreements
Baroness Janke Excerpts(3 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Stedman-Scott (Con)
The noble Lord is as impatient as ever, and so are we, to resolve this issue. The Government received a request from Canada in November 2020 to conclude a reciprocal agreement to include indexation of pensions. We will be responding shortly.
Baroness Janke (LD) [V]
My Lords, people with frozen pensions have often lived abroad for more than 15 years and have also lost their vote. Is it not time that the Government restore democratic rights to these citizens, many of whom still pay their taxes in the UK?
Baroness Stedman-Scott (Con)
The decision to move abroad is voluntary and a personal choice dependent on the circumstances of the individual. For many years now, advice has been provided on the GOV.UK website that the UK state pension is not uprated overseas, except where there is a legal requirement to do so.
Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2021
Baroness Janke Excerpts(3 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
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.