Pension Schemes Bill [HL]

Debate between Baroness Janke and Lord McKenzie of Luton

Committee stage & Committee: 4th sitting (Hansard) & Committee: 4th sitting (Hansard): House of Lords
Wednesday 4th March 2020 Grand Committee

[Baroness Janke]

My Lords, I have three amendments in this group. Amendments 87 and 88 relate to auto-enrolment to reduce the lower age limit to 18 and introduce a review of auto-enrolment which could also examine the possibility of removing the lower earnings limit.

As many noble Lords have said, the success of auto-enrolment is clear, with 87% of eligible employees participating in a workplace pension in 2018. However, by reducing the lower age limit to 18 and removing the lower earnings limit, a further £2.5 billion could be added to savings.

There would also be advantages for younger people in starting to save for pensions earlier in their working lives. It is estimated that the average 18 year-old will end up with a pension pot at retirement around £18,000 lower if they have to wait until 22 to be automatically enrolled. Given that we want people to start saving for a pension as soon as possible, an age limit of 22 seems increasingly hard to defend. Even employers would generally have a simpler system were they to enrol everyone, rather than having different rules for those above and below different age thresholds.

Moreover, further extending the coverage of auto-enrolment by reducing the earning threshold to the national insurance primary threshold would bring 480,000 people, mostly women, into pension-saving. It would also help to improve the gender pensions gap, which is the subject of Amendment 96 in the same group and a growing matter of concern. A woman aged 65 has one-fifth of a 65 year-old man’s pension.

Private pension schemes seem to be the main reason for the gender gap, placing women at a disadvantage, mainly due to domestic roles and lower pay. Among 65 to 74 year-olds, median private pension wealth is £164,700 for men and £17,300 for women, who have just over 10% of the private pension wealth of men. Among the population as a whole, women’s median pension wealth is £4,300, less than a quarter of the £19,800 held by men.

Although auto-enrolled private pensions include all employers, they exclude low-paid employees. Like other private pensions, they make no allowance for periods of caring, hence they perpetuate further the pensions gender gap. New modelling has shown that a family carer top-up in an auto-enrolled pension would substantially boost women’s private pension wealth. Also, the suggestion of a voluntary earnings-related state pension addition—a fully portable auto-enrolled option that allows carer credits—would be simpler and would better meet women’s need for extra pension savings. Amendment 96 provides the opportunity for an early review of issues affecting the pensions gender gap in CMP schemes.

I support the amendments in the group in the name of the noble Baroness, Lady Drake, which address similar and related issues. I beg to move.

[Lord McKenzie of Luton]

My Lords, Amendment 95 in this group is in my name. It seeks to press the Minister to make three important changes to the current auto-enrolment scheme—there are some overlapping issues in this. The changes are: to remove the threshold requirement for earnings over £10,000 to be auto-enrolled; to remove the qualifying earnings deduction; and to extend the threshold down to the age of 18 for workers. As NOW: Pensions points out, these would be positive steps in helping to narrow the pensions gender gap and would be a significant step in boosting participation in pension saving. This should be uncontroversial, as it goes with the flavour of the deliberations of the 2017 automatic enrolment review.

However, on timing, the Government’s ambition is to phase in the abolition of the LEL, with broader changes to the framework, until the mid-2020s. We suggest that this is a weak ambition and urge the Government to reconsider. We recognise that the changes cannot all happen overnight, but the longer we wait, the more difficulty there will be in getting younger people into the savings habit. Abolition of the LEL and making contributions payable from the first £1 of earnings will help to build financial resilience. If implemented, these measures would eventually—I stress “eventually”—bring an additional 910,000 workers into auto-enrolment with, as we have heard, an additional £3.8 billion of pension savings. It would be a good first step in addressing the pensions gender gap.

Pension Schemes Bill [HL]

Debate between Baroness Janke and Lord McKenzie of Luton

Committee stage & Committee: 3rd sitting (Hansard) & Committee: 3rd sitting (Hansard): House of Lords
Monday 2nd March 2020 Grand Committee

[Baroness Janke (LD)]

I have some amendments which we will come to later concerning similar issues. I very much support this amendment. The briefing that we had from the ABI gave us quite an insight into the way that women suffer as a result of not having a proper pension settlement. I very much welcome Amendment 78, which seeks to get the spouse’s permission for the transfer of a pension.

[Lord McKenzie of Luton]

My Lords, there are three amendments in this group. Amendment 78, in the name of the noble Baroness, Lady Altmann, focuses on the evidence of a member’s spouse’s consent when a transfer is to be made. We believe that this amendment has considerable merit and are supportive of it. Quite what the technicalities that come to confront us might be remain to be seen, but certainly we should seek to make progress on it.

Regarding the other two amendments in this group, Amendment 99 is simply the Northern Ireland equivalent of Amendment 77, which, as we have heard, deals with unfunded public service DB schemes. I am alarmed to hear that without this amendment they would be attacked by some source. That is rather worrying. Regarding the prescribed conditions that must be satisfied for the purposes of the provision, can the Minister outline what those might contain?