Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2021

Baroness Wheatcroft Excerpts

Thursday 25th February 2021 Lords Chamber

[Baroness Wheatcroft (CB) [V]]

My Lords, as others have, I thank the Minister for introducing this SI in her characteristically clear, straightforward way. I declare my interest as set out in the register as the director of a financial services business.

We have to be grateful that auto-enrolment was introduced in 2012, that the scheme has prospered and that during this difficult period of Covid the Government have continued to support it. Getting people to save for their retirement is an imperative, and the sad thing is that so many will find themselves reaching retirement with only the tiniest of pension pots. Given the level at which auto-enrolment starts, it would be wrong to encourage people to believe that a happy retirement necessarily awaits.

It is absolutely the right thing to have kept the threshold where it is because something that has become apparent in the time of Covid is just how little of a cushion many people have, and therefore bringing the threshold down or altering it at all would have brought people closer to destitution. A report from the Joseph Rowntree Foundation at the end of last year found that, appallingly, the number of people in destitution during the previous year had risen by one-third. This meant that 2.4 million people, as the foundation says, were living in a position where they were unable to afford to meet their needs or those of their children. That is an appalling state for a country that is supposed to be a civilised leader in the western world.

People who were still in work found themselves having to go to food banks on an ever-increasing scale so it is crazy for us to believe that they could be saving for a pension. The problem is that so many people in our country work but do so on a very, very low wage. The problem is not with auto-enrolment—the scheme is good—but with the amount of money that people have to save.

Does the Minister have plans to do anything about the unfairness that is part of our capitalist system? I do not want to turn the capitalist system upside-down—far from it—but, as we come out of Covid, the fairness agenda will have to be addressed in a way that I do not see being done currently. I would be interested to hear the Minister’s views on that. I know she has a deep social conscience that will make her uncomfortable with the discrepancy in many businesses between those at the top and those at the bottom.

Setting the minimum wage where it is now means that many people who take dividends out of businesses are finding those dividends financed, in effect, by the taxpayer in the form of tax credits to those at the bottom of the company who simply cannot afford to live on what they are being paid. The working poor are a major problem in this country, and that problem will of course be exacerbated when they retire and have only their state pension to live on.

At the other end of the scale, I endorse what the noble Lord, Lord Bourne, said when he asked the Government what they were doing to make more people aware of the importance of saving for their retirement. Although of course I have every sympathy for those who are not in a position to save for their retirement, I also believe that those who can save should, and that they should save not only on their behalf but on behalf of their children. Can the Minister tell me in particular what steps the Government are taking to promote the junior SIPP scheme—the junior pension—to which people could contribute small amounts from the birth date of their children and which would multiply over time to provide a decent pension?