Pensions Bill [HL]

Baroness Greengross Excerpts

Thursday 3rd March 2011 Grand Committee

[Lord Boswell of Aynho]

Perhaps I may briefly invite my noble friend to consider one particular point about the raising of the threshold. There is no need for a commitment at this stage, although it has been implied that it will be considered. Can my noble friend give some thought to, and discuss with his Treasury colleagues, the way in which this might be introduced annually into the national consciousness? I hesitate to dangle another red herring before the Committee in the shape of the national minimum wage, on which I have some prior form. However, if we are beginning to look at the impact on labour markets of a number of items, and some of the misguided or inappropriate claims that are made, or the fact that people say, “I don’t think I can afford that anymore and I want to pull out”, it would be useful to have a national economic snapshot. Although this is strictly about the labour market and within the Minister’s remit by definition because he is legislating on it, it is part of a national economic snapshot. Some people may have noticed today in relation to the national minimum wage a suggestion with which I do not agree—that we should announce it and defer it for 12 months. I merely make the point that probably on the occasion of a Budget it would be useful to have an annual appraisal that was keyed in and could be related by the commentators to tax rates, take-home pay and so forth. It would add to clarity and transparency.

[Baroness Greengross]

At Second Reading, I stressed the point that one good aspect of the trigger was that it would help prevent employees and employers from making very small contributions. This is still an important point.

[Lord Freud]

My Lords, first, I thank the noble Lord, Lord McKenzie, for leaping into the breach and allowing us to have this debate on the issue about the trigger at which an individual is automatically enrolled being reduced. We are looking at the three amendments, together with the amendment of the noble Baroness, Lady Turner.

The reference to the potential move to the tax threshold is a really important issue that deserves a robust debate in its own right. We have an opportunity to debate it in later amendments. Rather than pre-empting that debate—in which I will make a commitment—I turn to the specific proposals in the amendment. We have committed to alignment with next year’s tax threshold of £7,475. This is the right direction of travel. However, we also need to retain flexibility for the future in order that we continue to target the right groups at the right times. I very much take the point of the noble Lord, Lord Boswell. There are quite a few issues that have to be looked at in the context of that debate. Let me put that to one side because we will be reverting to it. I apologise for the scars that the noble Lord, Lord McKenzie, bears. As a result of the level of uncertainty that exists in the structure of the pension system, we look to have rather more freedom of manoeuvre than he was able to enjoy.

This Government have always supported automatic enrolment into workplace pensions. We believe that it is the step change that will make a critical difference to a boost in retirement savings. However, we also believe that the new automatic enrolment earnings trigger is a significant improvement to the breakthrough in pension reforms that the noble Lord, Lord McKenzie, and so many other members of this and another place work so tirelessly to develop. Automatic enrolment for every individual into pension saving is not always the right thing to do. The key question is, and always has been, whether low earners would benefit from saving, as the noble Lord, Lord Stoneham, pointed out. It makes no sense to require people to sacrifice income during their working life and redirect it into private pension saving, when that saving makes them no better off.

The nub of this issue is about getting the right people saving. We, therefore, commissioned an independent review to ensure that the scope proposed for automatic enrolment by the previous Government was right. We wanted to look again at the point at which people should be auto-enrolled to ensure that we capture the right group.