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

Lord McKenzie of Luton Excerpts

Tuesday 13th March 2012 Grand Committee

[Lord Boswell of Aynho]

My Lords, almost by definition those attending in this room are enthusiasts for pensions, and we are a rather self-defining and small number. Of course, I would join in the approbation of both the principle of auto-enrolment, the related but not identical issue of the NEST scheme, and the new regulations which will provide some authentic alternative tests, and will make it easier for businesses to come to terms with auto-enrolment. That seems to be very welcome, and that should be put on the record. I do not think there is any material opposition, providing that we can make these things work.

I do not wish to add to the Minister’s troubles—because some very complicated issues have been raised—save only to comment on two of them. One is in relation to the remarks of the noble Baroness, Lady Drake, who knows this subject so well. When she raised the issue about salary sacrifice, it occurred to me that in some companies or organisations it would be not at all rare for arrangements to be made for consensual salary sacrifice with, as she said, the two options being put to an individual. There could potentially be a problem if there were a contractual arrangement, where perhaps there is a two-year undertaking and an option has been given for one or another, and the automatic enrolment might kick in in the middle. There would be difficulties unless the employer were particularly fleet of foot in ensuring that the employee was offered something new at that time because the situation might be different. That is a point of sensitivity which the Minister and officials may wish to consider.

My second point was prompted, although I am not for a moment suggesting that it is identical, by the issue about offshore employment. That is something that I have not thought much about since the days of the national minimum wage legislation, which was 15 years ago. Using that as a proxy—a very loose proxy—it occurs to me, reflecting back on the debates that we had on the Pensions Act last year, that we spent quite a lot of time talking about small pots. The noble Baroness, Lady Hollis of Heigham, who I am sure would wish to be here, mentioned extensively the position of women. One wanted them to be able to contribute; one wanted to find a cost-effective way; and one did not want the conditions to be unreasonably restrictive. That is all perfectly sensible. Then there were worries about the administrative cost and the practicability.

Perhaps for the purpose of this discussion in Grand Committee, I could mention using the proxy of offshore employment and it would be helpful if the Minister could consider the position of overseas employees. As I understand it, under the law, certainly if you are an EU and probably if you are an EEA national and you are employed here, you would expect to be offered exactly the same terms and rightly so. However, I am concerned that situations might arise where people come within the rubric, make one or two contributions and then maybe their employment shifts. They may go back to their native country because they have come here for a season, or whatever, but they will have entered into our national insurance records and into our private sector pension arrangements. Then they are left with what you might call a super-stranded or a super-small pot, to which they have an entitlement, which is difficult to claim.

This is not a completely nugatory issue. There are surprising numbers of people in this situation. For example, I remember one of the drivers at the Council of Europe, saying to me, “I have worked in London for a bit and I have got to come to London to sort out the two or three years’ of pension entitlement that I have”. That is reasonable enough. We are not arguing against the principle. However, in making the whole matter of automatic enrolment and the related matter of NEST viable, we need to try to minimise the administrative complexity and, at the same time, ensure that those who have earned entitlement should be able to avail themselves of it. It should not all disappear into a kind of bureaucratic black hole, which can be redeemed only by superhuman efforts and personal attendance at a former company’s seat. I notice the noble Baroness, Lady Drake, is nodding at that.

I do not think that either of those two points that I have raised turns us away from the sensible things that these regulations intend. However, it is important that we should think about them. In a way, this has refired my enthusiasm for the fact that we will need a structured review in four or five years’ time—in 2017—to look at whether this is working as we intend. If any of these kinds of difficulties need attention then, they should receive it, if they have not been attended to beforehand.

[Lord McKenzie of Luton]

My Lords, my noble friend Lady Drake has dealt with the substance of these regulations from our perspective, so I can be brief and I shall ask few questions, which the Minister will doubtless be pleased to hear. We should start by acknowledging again the decision to proceed with an auto-enrolment following the independent review and to support NEST as an integral part of this. I think the Government should be congratulated on taking that forward.

As the Minister will be aware, we have concerns about the scope of some of the easements introduced by the Pensions Act 2011 and by this suite of regulations but the basic architecture remains intact. However, further increases in the personal tax allowance, should these be forthcoming in the Budget, will exclude even more workers from the benefit of auto-enrolment with consequential savings for the Treasury. Obviously, we support offshore workers being brought into scope. This was always the intention. As we have heard, the order treats someone with an offshore employment as,

“a worker ‘who is working or ordinarily works in Great Britain under the worker’s contract’”,

and similar provisions apply to Northern Ireland. However, the provisions do not apply where the employment is in the foreign sector of a cross-boundary petroleum field. Are we dealing here only with cross-boundary fields affecting Norway, or are there any others? I do not know about the Southern Basin or the Irish Sea, or whether there could be an EC country involved, which was the purpose of the question.