Pensions (Extension of Automatic Enrolment) (No. 2) Bill

Baroness Sherlock Excerpts

2nd reading
Friday 14th July 2023 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Baroness, Lady Altmann, for introducing this Bill and all noble Lords who have spoken. The noble Lord, Lord Palmer, is right: we are a select band. However, we are none the worse for it. It is always interesting, and I learn something every time this particular band gets together, so it is a joy to be back here today.

I am grateful for the briefing we had on this matter and for some excellent paperwork supporting the Bill. As noble Lords have observed, it is a little strange: Private Members’ Bills must come from private Members. On some, however, the Government smile more readily than they do on others, and if they smile readily, the passage can be eased through both Houses. That is what we have today, so I am grateful that the Government have smiled on this one and I look forward to hearing the Minister talk about it at more length shortly.

I start by celebrating auto-enrolment itself as one of the great public policy successes of recent years. As the noble Baroness, Lady Altmann, said, its origins lie in the work of the Pensions Commission set up by the last Labour Government, chaired by the noble Lord, Lord Turner, and on which my noble friend Lady Drake and the late and greatly lamented Sir John Hills served with such distinction. The coalition Government implemented it in 2012, and there has been growth in the number of people saving for a pension as a result. We can all celebrate that. However, it is clear that pensions adequacy remains an issue; noble Lords have raised a variety of questions, from the gender pensions gap to people in multiple jobs to the gig economy—all of which need addressing. While this tiny Bill cannot do that, hopefully the Minister can give us a nod to show us which way the Government are thinking when it comes to addressing these problems.

This Bill would enable the extension of auto-enrolment in two directions. It would amend the Pensions Act 2008 to give powers to the Secretary of State to make regulations to do three simple things: to reduce the lower age limit at which eligible workers must be automatically enrolled or re-enrolled into a pension scheme by their employers; to remove the lower earnings limit—the LEL—from the qualifying earnings band so that contributions are calculated from the first pound earned; and to change the requirements of the annual review of the qualifying earnings band. As we have heard, the Government will have to bring forward a consultation, which I hope they will do soon. I look forward to hearing some tips on when that might happen. They would then have to bring forward regulations. This is only a permissive Bill, but it would enable the Government to fulfil some of the commitments they made in the 2017 review of auto-enrolment to introduce changes in the mid-2020s.

As we have heard, the Bill does not specify a new lower age limit, but the Government have previously committed to reducing the limit from 22 to 18 and the Explanatory Memorandum says that this is the policy intent. Although this is a Private Members’ Bill, the EM was produced by DWP, so presumably that makes it a government policy intent. Just for clarity, though, can the Minister confirm that it is the Government’s intention to reduce the lower age limit to 18? Is it also the Government’s intention to use these powers to remove the LEL from the qualifying earnings band? Maybe that is obvious, but it is always good to have these things on the record. Any indication on timing that the Minister could give us would also be helpful.

If these measures were introduced, while they would not solve all our problems, they would bring significant numbers of people either into the orbit of auto-enrolment or the possibility of employer contributions, including: those who are below the current qualifying age limit of 22; those who earn above the trigger point of £10,000 but are getting employers’ contributions only on earnings above the lower earnings limit who could then get them from the first pound; and those earning below the trigger point but above the LEL who are able to opt in but who, in future, could then get employers’ contributions from the first pound.

The impact assessment did a fine job of using the available data to model what could reasonably be modelled. It played around with likely participation and savings rates in various directions and concluded at para 5.18 that if in force in 2022-23, the combined proposals would increase total pension saving by £2 billion. Of this, £0.9 billion would be paid in employee contributions, £0.8 billion would be paid in employer contributions and £0.2 billion would be paid in income tax relief on employee contributions.

Of course, this is all dependent on assumptions about opt-out rates. Paragraph 8.10 of the impact assessment tells us:

“Between 4 and 5 per cent of employees who are automatically enrolled opt-out”.


It goes on to say that another 5% of employees who are auto-enrolled and start saving

“then make an active decision to stop saving whilst continuing to work”.

Paragraph 8.11 says that

“around 10 per cent of employees who are automatically enrolled either opt-out or actively cease saving in the first year”.

However, much of the participation data behind this was from the ONS’s annual survey of hours and earnings in 2020, which was of course before the cost of living crisis hit. Does either the noble Baroness, Lady Altmann, or the Minister know what work has been done to assess whether this opt-out rate has changed or is likely to change in the current economic climate?

A number of other important questions have been asked by Members from across the House. As my noble friend Lady Drake said, it will be important for the Government to confirm in some detail when and how they will address the net pay issue. I hope that the Minister will be able to give both my noble friend and the House an assurance that the Government have plans to monitor and address any poor practices that might emerge among employers trying to stop young workers benefiting from auto-enrolment in the way this Bill and the Government envisage. I would also be grateful if the Minister could give the House any more information about the way in which the Government are engaging with key stakeholders, in particular employers, trade unions, consumer bodies and especially young people themselves.

Having raised these issues, I want to make it clear that the Opposition fully support this Bill, despite its limitations. My thanks go to all involved, including the noble Baroness, Lady Altmann. I also thank Joshua Osborne, a University of Sheffield student who was on a placement with me last week, for his work in preparing important information on this Bill. I thank all those who have spoken today and carry on supporting the important issue of pensions in our society. I wish the Bill well.

Pensions (Extension of Automatic Enrolment) (No. 2) Bill

Baroness Sherlock Excerpts

3rd reading
Monday 18th September 2023 Lords Chamber

[Baroness Altmann (Con)]

My Lords, I congratulate and thank my honourable friend Jonathan Gullis on initiating this Private Member’s Bill in the other place. I also thank my honourable friend the Pensions Minister, Laura Trott, my noble friend Lord Younger, the Lords Minister, DWP officials and the Bill team, the Public Bill Office, the Lords Library and the Lords clerks.

This Bill reflects the strong cross-party support in both Houses and continued political consensus on auto-enrolment. In that regard, I thank the noble Baronesses, Lady Sherlock and Lady Drake, whose work on the Pensions Commission recommended automatic enrolment, and the noble Lords, Lord Davies and Lord Palmer, for their speeches supporting the Bill, which paves the way for half a million younger people and at least 2.5 million older workers to build bigger pensions, particularly for the low paid. I look forward to the promised early consultation to confirm the details and timing of the regulations, which will see the provisions of the Bill implemented by all employers. I beg to move.

[Baroness Sherlock (Lab)]

I thank the noble Baroness, Lady Altmann, for piloting the Bill through this House and I share her thanks to the Minister and his team, and all noble Lords who participated. Auto-enrolment is a much-loved child with more than one parent. As the noble Baroness said, the work came from the Pensions Commission, set up by the last Labour Government and on which my noble friend Lady Drake and the noble Lord, Lord Turner, served with such distinction. The coalition Government implemented it in 2012, and there has been a welcome growth as a result in the number of people saving for a pension. We can all celebrate that—but, as we noted at Second Reading, pensions adequacy is still an issue, so we need to look at continually improving auto-enrolment and addressing the question of the gender pensions gap, which remains a matter of serious concern.

This simple, permissive Bill would allow the Government to make progress in fulfilling their commitment by implementing some of the 2017 review measures, namely reducing the lower age limit for being auto-enrolled and removing the lower earnings limit. The Minister confirmed at Second Reading that the Government were still committed to doing that in the mid-2020s. Without wishing to be depressing, as 2023 begins its descent towards the sea, I wonder if the Minister can give us any hint as to whether 2024 might be the year, or is this gently rolling into the grass beyond the election?

The Opposition fully support this Bill. I thank again all those involved in proposing it and look forward to its passage.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, I, too, congratulate my noble friend Lady Altmann on piloting this excellent Bill to its final stages. As I said at Second Reading, it has the full backing of His Majesty’s Government, and I am pleased to reiterate that support today. As the noble Baroness, Lady Sherlock, has just said, the 2017 review measures will see hundreds of thousands more young workers brought into workplace pensions for the first time. Alongside this, 2.5 million existing savers will see their pension contributions grow. Removing the lower earnings limit will mean that every worker will be paying pension contributions from their first pound of earnings and benefit from an employer contribution. Overall, an extra £2 billion-worth would be saved a year.

I am grateful for the constructive scrutiny of the Bill from noble Lords on all sides of the House. I acknowledge the thoughtful interventions at Second Reading of the noble Baronesses, Lady Sherlock and Lady Drake, and the noble Lords, Lord Palmer of Childs Hill and Lord Davies of Brixton. If the House agrees to final passage today, the Government will look to play their part by consulting on how to implement the expansion of automatic enrolment at the earliest opportunity, which I hope gives some idea of the timescale to the noble Baroness, Lady Sherlock. We hope that it could be later this year. We will then report to Parliament about how we intend to proceed in accordance with the provisions in the Bill. I am very pleased that there is cross-party support for my noble friend’s Bill, and I hope that this House will agree to its final passage today.