Draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2016

Angela Rayner Excerpts

Wednesday 16th March 2016 General Committees

[Angela Rayner (Ashton-under-Lyne) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Percy, and to face the Minister again. The name of the order just rolls off the tongue, doesn’t it?

The order reflects the view shared by the Government and the Opposition that the overriding purpose of auto-enrolment should be to ensure that people have sufficient retirement income savings. I do not intend to divide the Committee, but I will make some short but very important points and pose some questions that I hope the Minister will answer today.

Different groups, such as women, ethnic minorities and disabled people, experience differences in pension savings. In the debates on the orders in years when the earnings trigger was increased, concerns were expressed about the number of low-paid workers—disproportionately women—who were, in effect, excluded from the scope of auto-enrolment as a result. Having a relatively low income in retirement can be the result of lifelong disadvantage. When such disadvantage extends beyond a person’s working life, it can indicate particular vulnerabilities and the need for support and social policy intervention.

Automatic enrolment, which is intended to increase participation among those who are most likely to be under-pensioned and particularly the low-paid, should go some way towards increasing the level of private pension saving among those in under-pensioned groups. However, the way in which the auto-enrolment eligibility criteria are structured means that employed people from under-pensioned groups are less likely to be eligible for it. It would therefore be helpful to know from the Minister what his Department is doing to promote the voluntary opt-in arrangements for those who do not meet the minimum auto-enrolment thresholds, but who could benefit from saving, such as the self-employed or people with multiple lower-paid jobs.

According to the Pensions Policy Institute, removing the automatic enrolment qualifying earnings band entirely would have a greater positive impact on retirement income than increasing the minimum contribution level to 10% of qualifying earnings. What is the Minister’s view of that proposal?

It is important not only to ensure that people put something into their pots, but that they understand the choices they have to make. Those who are eligible for tax relief should not be made to search for the qualifying criteria; those should be clear to them before they are enrolled. That applies particularly to those on low incomes. It is not enough just to expect the 180,000 workers earning between £10,000 and £11,000 a year, and the small and micro employers that the Minister mentioned, to search the internet to check whether they have auto-enrolled into a workplace pension that uses a net pay tax relief arrangement. Such workers will not benefit from tax relief on their contributions. What will the Government do to inform those employers and workers to ensure that they get the best deal and the most value from their investments?

As we have a long day ahead of us, I shall make one final, overarching point. In many Committees like this, I have raised the issue of protection for savers. That has to be a crucial part of the auto-enrolment process. I remain concerned at the lack of action by the Government regarding protection for savers, particularly in relation to the master trusts that many small and micro employers choose as a vehicle for auto-enrolment.

As I noted last week, we have heard three different positions from three different Ministers. The Economic Secretary to the Treasury told us during a recent Public Bill Committee that legislation was imminent. The Minister for Pensions then told the Select Committee on Work and Pensions last week that legislation was urgently needed, but that she could not get parliamentary time from the Government. Finally, the Under-Secretary before us said at our last exchange in a Delegated Legislation Committee that the Government were still working out whether they should do anything and, if so, what. Frankly, neither the disagreements nor the dithering will inspire much confidence among the ordinary savers whose retirement security is potentially in danger, so will the Minister finally give us a definitive answer on the Government’s plans today?