Pension Review: Phase 2

Viscount Younger of Leckie Excerpts

Wednesday 18th December 2024 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, I congratulate the noble Baroness on her promotion. I understand that stage 2 of the review, if it does go ahead, focusing on pensions adequacy, might recommend that pensions contributions increase from 8% to 12%, meaning that employees would continue to contribute 3%, but with employers increasing their contributions from 5% to 9%, which is a very heavy burden, especially on hard-pressed small businesses. In addition, for employees opting out of auto-enrolment, which is their right, the recommendation might be that employers would still pay their side of the contribution. Why did the Chancellor not think holistically about all the costs that businesses have to bear in employing staff when she made the decision in her Budget to raise the national insurance contributions?

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Viscount for his kind words. I am very grateful; it is very gracious of him. He is asking me to comment on speculation about something that might be recommended in the phase 2 review, which has not started yet, so I hope he will bear with me. We think that getting this the right way around really matters. Phase 1 is about trying to get the market working as well as it should, both the DC side and the consultation on the Local Government Pension Scheme. If we can get the market functioning well and drive more scale and consolidation, looking at what they are doing in Canada and Australia, we can then have a better-functioning market and better returns. At that point in stage 2, we can look at matters of adequacy and at what money is going into it.