Automatic Enrolment (Offshore Employment) (Amendment) Order 2020

Baroness Sherlock Excerpts

Tuesday 19th May 2020 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for introducing these orders, and thank all noble Lords who have spoken.

I was delighted to hear the noble Baroness, Lady Anelay, mention the Mercy Ships, and the noble Baroness, Lady Fookes, talk about the important work of the Mission to Seafarers. Indeed, it has been a nice joint meeting of two clubs: those with an interest in maritime and offshore matters and those of us who dabble in and around the world of pensions. Let us come together again at some point and have another conversation.

I am also grateful for a history lesson from my noble friends Lord Blunkett, Lord McKenzie and Lord Hain, who gave us their insights into the history of this policy. As always, I am grateful to my noble friend Lady Drake for her clear analysis and for her original work on the Pensions Commission, which was so crucial.

It is clear that this crisis will have significant implications for pensions and future generations of pensioners. Pension funds face huge challenges. Today’s statistics on unemployment and benefit claims show the scale of the crisis facing today’s workers, many of whom are struggling today, even before saving for tomorrow. A report by the Resolution Foundation, as well as highlighting the lost generation of young workers, painted a challenging picture for a cohort of workers in their early 60s. I am with my noble friend Lady Drake, and other noble Lords. It is vital that Ministers do not weaken their commitment to auto-enrolment during this pandemic and that there is a focus on rebuilding pensions in the Government’s economic plan.

As my noble friend Lady Kennedy of Cradley said, auto-enrolment was a landmark achievement of the Labour Government. Although we legislated for it, the continuity of policy that has brought us to this point is welcome. Labour has consistently supported action to ensure that the coverage of the scheme is as wide as possible, so the Minister will not be surprised to hear that we support these orders. As noble Lords have heard, these instruments confirm the decision to include seafarers and offshore workers within the scope of auto-enrolment. Unlike the noble Lord, Lord Blencathra, I am glad to see the end of the sunset provision. Would it not be strange to repeatedly review only the position of seafarers and offshore workers, while maintaining auto-enrolment for all other sectors? I am also pleased that the DWP rejected the arguments to exclude this sector altogether from the auto-enrolment provisions, and its conclusion that “ordinarily working” in the UK remains the right test for eligibility for auto-enrolment for this group, as this captures a greater number of the target population of workers. In doing so, it had to reject the case made by some employers who wanted a looser definition of which workers should be eligible for auto-enrolment. I share the view of my noble friend Lady Drake and others on the vital importance of maintaining the comprehensive reach of auto-enrolment. It is vital that we do not start creating loopholes in the regulatory framework that could be used by those seeking to evade their auto-enrolment duties.

The effectiveness of auto-enrolment in achieving its policy objective of increasing savings is also determined by the opt-out rate. Like my noble friend Lord McKenzie, I would like some clarity from the Minister on how many workers the Government expect to be affected by these orders, and what the opt-out rate for them is likely to be. The impact assessment said that the opt-out rate, which it assumed in assessing costs to be 9%, was in line with the current national average. Does the DWP not know what the opt-out rate is for these sectors? I would be interested to know.

Although these decisions affect only a particular sector, they serve to reinforce the notion that auto-enrolment should achieve a mass pension-saving system through the workplace, with duties extending to all employers with eligible workers. That was how auto-enrolment was conceived and I am glad that the Government are holding to that policy. However, too many workers are still excluded from the eligible population for auto-enrolment. With other noble Lords, I ask the Minister when the Government intend to act on those exclusions. The first of these are the low paid, as raised by my noble friend Lord Foulkes. The auto-enrolment earnings trigger excludes many low-paid workers from saving for their retirement. When will the Government lower the earnings trigger to ensure as many low-paid workers as possible, including those in the maritime industries, can benefit from auto-enrolment?

I would also be interested to hear the Minister’s response to the noble Lord, Lord Wei, who raised the issue of people with multiple jobs. I was not sure whether he was talking about people with multiple sequential jobs—in which case, I guess he was asking about the pensions dashboard—or if, interestingly, he is talking about those with multiple jobs at the same time. Can the Minister confirm that if none of those is above the threshold it means that they do not enter the scheme at all?

The second group, raised by the noble Lord, Lord Hain, and others, is the self-employed. Excluding the self-employed from the benefits of auto-enrolment means that pension saving by self-employed workers is worryingly low. The Minister mentioned that share fishermen are not included in these regulations because they are self-employed. What progress have the Government made on options to remedy this situation, to ensure that share fishermen and other self-employed workers in the maritime industries are saving for their retirement as well?

The third group is the young. The age threshold for auto-enrolment excludes workers aged under 22. When do the Government plan to lower the age threshold to ensure that younger workers are saving into their pensions as soon as they begin working?

We are facing an economic crisis on a scale not seen in my lifetime. The implications will affect the pensioners of today and for generations ahead. Noble Lords have raised a range of important questions. If the Minister cannot answer them all today, will she consider making a Statement to the House about what the Government are doing to protect the pensioners of today and the pensioners and pension funds of tomorrow? That would give all noble Lords a chance to discuss the broader issues in more detail. I look forward to the Minister’s reply.