Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2012

Lord German Excerpts

Tuesday 13th March 2012 Grand Committee

At the end of the waiting period, if a worker is not eligible for automatic enrolment but subsequently becomes so, an employer can apply a second waiting period of three months, a facility that, as my noble friend Lord McKenzie has previously observed, tips the balance too far in favour of employer easement at the cost of the saver. These regulations allow employers flexibility in choosing the re-enrolment date, so where a jobholder is not eligible at the re-enrolment date but subsequently becomes so, will the employer still be able, yet again, to add a further three-month waiting period before auto-enrolling that individual? I hope the answer to that question is no because the short-term worker argument cannot apply in that situation because we are in the era of re-enrolment. As it is a three-year anniversary, I hope the administrative systems will be in place, but I can see an endless series of three-month waiting periods running through first staging and the subsequent re-enrolment period.

[Lord German]

My Lords, I will reverse the order in which I ask questions of the Minister on these regulations and the order. First, I welcome, as I am sure we all do, the extension to seafarers and off-shore workers. I have two questions. The first relates to the ordinary working test and the second to some of the conditions that I see in the impact assessment and the Explanatory Memorandum. I wish to get some understanding of the number of people who will be brought into the structure and of whether some people might fall out of it because of the way it is prescribed in the proposed legislation.

On the ordinary working test, the flag-blind approach is very welcome. We must avoid people being switched from being a normally UK worker by virtue of their vessel changing its flag to that of another country. The ordinary working test, as I read it in the documentation accompanying this legalisation, defines people’s work as starting and ending in a UK port. There are two exceptions to that which can normally be the case with seafarers and off-shore workers. Seafarers sometimes work on vessels that are incoming to the UK. They will often be flown out to the vessel in order to work it and then back into the UK afterwards. Often their starting point will not be with a vessel leaving a UK port but a flight from a UK airport to join the vessel, and then they will either bring it back to the UK or leave it at some other foreign port. Naturally, these people regard themselves as working from the United Kingdom. They might be working on a ship with a UK flag but they do not necessarily start from a UK port.

The same applies to off-shore workers. I had the fortunate experience—and I say ‘fortunate’ because it was very interesting indeed—of going to an off-shore oil platform in the North Sea. Most workers go by helicopter from an airport rather than by vessel to the gas and oil installation. I wonder whether legislation that says,

“starting and ending from a UK port”,

actually means starting and ending from a UK base rather than a UK port.

As to the numbers of people involved, I notice the revision of the estimate of the workers who will be engaged. As I understand it, there are 22,200 off-shore workers in the industry who would be classified as working from the UK and 27,800 seafarers. But the numbers who are eligible for auto-enrolment are of course significantly less than that: 9,000 of the 22,200 off-shore workers and 17,000 of the 27,800 seafarers.

Could the Minister explain the difference between those two sets of figures? Is it perhaps that some of these people are already in a pension scheme that meets the eligibility criteria? I do not understand why they would not necessarily be seen as being eligible for auto-enrolment anyway. I do not know whether that is a definition problem or whether I have misread the numbers in the way they have been portrayed to me.

My second set of questions relates to the definition of the quality test, which has already been referred to by the noble Baroness, Lady Drake: that is, of course, the three tests being applied. In the discussions that we have had on these issues in Committee, noble Lords will remember that we talked about the quality of the alternative schemes as well as who would necessarily fall in or out of them. It is that quality test about which I would like to ask my noble friend a specific question. It is in relation to the fees and the ways in which moneys might be paid back for short-term investments in small pots where the length of service is below the number of years for which it would have to continue, and where people have been offering back a certain proportion of the money, or alternatively, where the fees that are being charged on the money which is invested are greater.

It is my understanding that the Government has now taken the powers to regulate the fees charged in this area and I wonder whether my noble friend could explain if and when those powers are to be taken up in order to provide an alternative quality pension provision for those who are not taking up the NEST scheme, which we know is on offer alongside it. In general terms, these orders take the date a little bit closer to the countdown clock and I welcome the fact that we are getting much closer now to the date when these schemes will become part of the mainstream for the workforce of our country.