Pensions Bill [HL]

Baroness Donaghy Excerpts

Tuesday 15th February 2011 Lords Chamber

[Baroness Donaghy]

My Lords, we are reaching the end of the debate; I am conscious of the time and the ground covered. I will confine myself to one part of the Bill. In doing so, I associate myself with all the remarks made by my noble friend Lady Drake and congratulate her on her contribution.

I want to deal with the proposal to raise the salary level at which someone is automatically enrolled to £7,475 a year, with a future possibility of increasing that threshold. For 30 years, I represented low-paid workers. I was a member of the first Low Pay Commission and, as one of the European social partners, I was part of the team that led to the adoption of the part-time workers directive in the 1990s, so I want to focus on the threshold because of its impact on the low paid. Too often, we spend time here talking about people with careers; I want to talk about people with jobs.

I appreciate that the proposal is a result of a recommendation by the independent review which was published in October last year. The review team also considered whether the smallest employer or the older worker should be excluded, whether any changes to the proposed regulations, such as a three-month waiting period, would help, and whether simplification of the scheme, such as self-certification, would be advisable. My guess is that there was some negotiation within the review group on these areas and the lowest paid and casual workers lost out. I appreciate that the threshold of £15,000 was rejected by the review group, and I am grateful for that, but the proposed threshold of £7,475 this year, possibly rising to £10,000, might exclude those who have a series of jobs, some seasonal, some multi-site jobs with different employers. It might be neat and tidy, as some noble Lords have said, to fix on the income tax threshold, but that threshold is a political decision, not one based on need.

The CIPD, of which I am a fellow, conducted a survey last week indicating that 65 per cent of staff in the private sector are not saving in a company pension. This shows all too graphically the scale of the problem in future and surely argues for fewer exclusions, not more. Anything that is linked to an income tax threshold will mean that an individual’s pension future will be tied to the varying political whims of successive Governments. We need a plan that will last for 40, not four, years. If the threshold increases to £10,000, 1 million to 1.5 million people, mainly women, will be excluded.

When I first started work at the University of London in 1968, I was excluded from the occupational pension scheme, along with all my immediate workmates. In my case, it was because of a two-year eligibility requirement. In other cases, it was because they were part-time and, for the rest, it was because they were not earning sufficient to qualify for entry at that time. I was the lucky one because at least I got in eventually. Those who stayed and retired in the past few years did so on a reduced pension because of the obstacles placed in their way a lifetime ago. I sometimes feel as if this is where I came in.

We should not assume that low-paid people are stupid and do not want to plan for the future or make short-term sacrifices for long-term benefit. The lowest-paid men and women will be excluded from automatic enrolment not just for administrative convenience but because, I still believe, there is not sufficient appreciation in the UK of the impact of low pay on millions of people. When we talk about poverty, it is too often focused on benefits, tax credits and other forms of support. We should also be focusing on lower-paid workers and enabling them to plan for the future. I urge the Minister to reconsider his proposal to raise the threshold for eligibility and to put people on the right road to help themselves to secure their own future.