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

Lord Hain Excerpts

Thursday 25th February 2021 Lords Chamber

[Lord Hain (Lab) [V]]

My Lords, I thank the Minister for her clarity in introducing this instrument. It is a pleasure to follow the noble Baroness, Lady Wheatcroft, particularly because of her appeal for fairness in the context of the pandemic.

There have been many expert contributions to the debate so far on the auto-enrolment scheme, which I was privileged to introduce in 2007-08 as Secretary of State for Work and Pensions, making employee pension membership virtually compulsory and helping people save for their retirement. At that time many millions were staring at a pensions black hole but since then I am pleased to say that over 10 million people are in auto-enrolment.

However, huge challenges remain around the level of pension savings, not least as we see the impact of Covid-19 exposing deep inequalities and injustices. We need to go much further to help people save for retirement. One important way to do that is through collective defined contribution pensions or collective money purchase schemes, as they are known in the Pension Schemes Act 2021. As I have said before in your Lordships’ House, I welcome the introduction of CDC schemes. I believe they represent an attractive third way in workplace pension provision. They have the capacity to deliver significantly better outcomes for savers than individual direct contribution schemes, improving pensions outcomes for workers.

I have spoken to Royal Mail and its union, the Communication Workers Union, and understand that they are keen to launch Royal Mail’s collective pension plan for its 143,000 employees in the second half of the next financial year. I therefore ask the Minister to ensure the passage of the necessary secondary legislation, including tax changes, in a way that will allow such schemes to begin accepting contributions. I also understand that the scheme will require authorisation from the Pensions Regulator. Could she please address this matter in her reply? There is still quite some work to be done before the first CDC scheme in the UK is up and running but, as with auto-enrolment in 2008, there is a significant prize to be won with the introduction of CDC schemes in 2021.

I again appeal to the Minister to reconsider the issue of the 5 million self-employed, many of whom are low-paid and have no pensions at all. When will the Government find a solution to this serious gap?

With defined benefit schemes closing at an alarming rate, the current norm of completely inadequate defined contribution schemes means that the state will incur multibillion costs in future to save millions of people from abject poverty. The average pension pot is £50,000, which would give an annual income of just £2,500 a year—nothing like enough to live on, even with the full state retirement pension. Experts estimate that we should each save at least 13% of our income from the age of 25 but we are doing nothing like that. The Government are simply not addressing this situation. The blunt choice is between a future of poverty and misery in old age for millions or politicians today being honest about the need for workers’ and employers’ incentives to pay more into pensions and for the Government to raise extra taxation to help finance decent pensions and elderly care.