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

Matt Rodda Excerpts

Committee stage
Wednesday 15th March 2023 Public Bill Committees

[The Chair]

The general debate. I call Matt Rodda.

[Matt Rodda (Reading East) (Lab)]

It is a pleasure to serve under your chairship, Sir Christopher. I will address my remarks purely to the amendments.

I thank the hon. Member for Glasgow East for his work on the subject. He made a deeply personal and heartfelt point about his own experience. However, there has been a wide range of discussion and debate on the matter, and I believe that this afternoon we ought to focus on the Bill itself. I am aware that time is pressing, and given the matters being discussed in the main Chamber, I will leave my remarks at that for now.

[The Parliamentary Under-Secretary of State for Work and Pensions (Laura Trott)]

It is a pleasure to serve under your chairmanship, Sir Christopher.

I have respect for the hon. Member for Glasgow East, as he knows. I listened carefully to what he said. He set out his personal story beforehand, and it is very powerful. I reiterate the points made by my hon. Friend the Member for Stoke-on-Trent North and by the hon. Member for Reading East. This was looked at as part of the 2017 review, and there will be a statutory consultation to follow it up.

--- Later in debate ---

[Margaret Ferrier]

It is a pleasure to see you in the Chair and to serve under your chairmanship, Sir Christopher. I would like to make some brief comments of support, as this Bill sits in the reserved space and naturally will apply in Scotland on Royal Assent.

We have already seen how automatic enrolment has successfully brought many more members of the public into a pension scheme, which will only serve to benefit them in later life and in retirement. Particularly as we are facing a cost of living crisis and many people are finding it much harder to put away spare cash for a rainy day, it is important and right that contributing to a pension from a younger age is made easier. For the younger generation just starting out in the workplace, retirement looks like a speck on the horizon—too far off to think about for some time yet. I am sure we all remember feeling the same; pensions were the last thing on our mind at that age. It is crucial, however, to start making those savings earlier in life, so that there is less pressure later, as retirement approaches and people have the realisation that they have not saved as much as they need.

A general lack of understanding about pensions is a real problem when it comes to future planning. Research by the Social Market Foundation has shown that most of the population nearing retirement age do not actually know how much money they will need to see them through retirement. The typical person aged 50 to 64 has pension savings that are 58% short of what they require. That adds up to a total annual savings gap of £132 billion across the country for those reaching retirement age.

I hope that this legislation, if passed, will have some positive impacts for the harder-to-reach groups in society: women, people with disabilities, and ethnic minorities. They already have substantially lower-value pension pots on average. However, I wonder whether, when eliminating the lower earnings limit for contributions and laying regulations, the Secretary of State might consider this being for employers only, and having a higher threshold for employee contributions in the light of the current economic difficulties.

I warmly congratulate the hon. Member for Stoke-on-Trent North on successfully steering his Bill through its legislative stages so far. Last year, I was lucky enough to see my own private Member’s Bill through to Royal Assent—incidentally, it was also on pensions policy—and I know how much hard work that is for the Member and for those supporting him, so well done.

[Matt Rodda]

Once again, it is a pleasure to serve under your chairmanship, Sir Christopher. I commend the hon. Member for Stoke-on-Trent North for his work on this Bill, and, indeed, other Members from across the House and the wider policy discussion about the importance of auto-enrolment. As the hon. Member for Rutherglen and Hamilton West rightly said, pensions adequacy is a very important issue facing the whole of our society; it is a matter of great importance. We should, across the House, be encouraging people to save for their future, so it is important to debate this issue today.

I particularly want to say, in the time that I have, that auto-enrolment in itself is a great public policy success of the last few years. It dates back to the work of the Pensions Commission for the last Labour Government. The coalition Government implemented this change in 2012, and there has been growth in the number of people saving for a pension as a result. That is a commendable step forward.

However, pensions adequacy remains an issue and it is important for us to continue to go forward. In doing so, we need to work in a gradual, sensible and practical way to try to encourage auto-enrolment, and to work with stakeholders such as businesses, savers themselves and, indeed, society as a whole to try to take this work forward. In that spirit, I have some questions for the Minister.

This Bill will clearly offer real advantages to many younger people, who will be saving not only a greater sum, but from an earlier point in their life. That will help to build a much better pension pot for those pension savers. My questions for the Minister are primarily about the nature of the consultation, because as we have heard, it is hugely important that we work with pension savers themselves, with employers and with other stakeholder organisations to ensure that there is consensus on this issue and that policy is developed in a sensible way. Therefore I would like the Minister to explain to the Committee a little more about the nature of the consultation: in particular, what work the Department has done to encourage pension savers, especially young people, to be aware of the potential to save more for a pension in the future; the discussion that she has had with employers, both individual employers and employer organisations; and what she will do to continue to work with them, because when this legislation is implemented, it is a step forward for them—it is a greater contribution. We need to work with them.

I would like to know what work the Minister is doing with trade unions. They have a very important part to play in the roll-out of auto-enrolment. I was glad that the hon. Member for Stoke-on-Trent North mentioned that and acknowledged the significant work that they do. I am also interested in the consultation, in so far as it has reached out to advice organisations such as Which? and many others that have an important role in the wider money and savings debate. I hope that she is discussing with them the importance of this.

My second question is about when the Department hopes to use these powers. As has been said, the Bill allows the Government the power to do this and explains how it would happen through a statutory instrument. However, the Bill does not specify when this might happen. The Minister has talked in the past about the mid-2020s. I would be grateful if she clarified how she defines mid-2020s, and whether she will take into account any other factors such as the overall performance of the economy and the nature of any continuing cost of living crisis as we approach that time.

Once again, I thank the hon. Member for Stoke-on-Trent North for his work on this matter, and I thank colleagues from across the House. I look forward to further answers from the Minister about the importance of consultation and bringing stakeholder groups with us on this important journey.

[Laura Trott]

I congratulate my hon. Friend the Member for Stoke-on-Trent North and, in absentia, the Under-Secretary of State for Transport, my hon. Friend the Member for North West Durham, on this excellent Bill, which will expand the benefits of automatic enrolment into workplace pensions to younger people and lower-paid workers.

I think we all agree that automatic enrolment has been a huge game changer in the workplace pension savings market over the past decade. Private sector workplace pension participation among eligible employees has increased by 44 percentage points since 2012, to 86% in 2021. As has been mentioned a couple of times, it has been especially transformative for women, low earners and young people, who historically have been poorly served by or excluded from workplace pensions. The proportion of women in the private sector participating in a workplace pension reached 87% in 2021, above that of men and more than double what it was in 2012.

Thanks to automatic enrolment, the overwhelming majority of eligible workers are now enrolled in a workplace pension, saving an asset for the future. Automatic enrolment is re-establishing a culture of retirement saving for a new generation. However, we know that there is more to do. The Government have made it clear that their ambition has always been to deliver on the 2017 automatic enrolment review measures. The review proposed two key measures: extending AE to young adults aged 18 to 21 by lowering the age criteria for enrolment; and removing the lower earnings limit, which would improve saving levels among low and moderate earners.

Since I took up my role as Minister for Pensions, I have been determined to make progress on AE expansion, and I am therefore delighted to confirm that the Government are supporting my hon. Friend’s Bill to do exactly that. The legislation will mean that younger workers and those who are in lower-paid employment—often because they work part time owing to personal circumstances, such as caring responsibilities—will be able to participate fully in automatic enrolment. For the first time, every worker will benefit from an employment contribution if they are enrolled or opt in; that is key to boosting the overall amounts being saved into a workplace pension. The powers in this Bill allow a Government-defined authority to deliver the changes set out in the 2017 review reforms, which Parliament has debated on numerous occasions, and I think there is broad agreement that it should become law.

On the questions from the hon. Member for Reading East, the Government are clear that implementing the expansion of automatic enrolment can only take place following consultation. That will be a consultation on the implementation approach and the timetable. He mentioned employer and employee engagement in particular. We absolutely need a full comms campaign, and—to the points raised by the hon. Member for Glasgow East—we could also look at what we can do for 16-year-olds. Even if we do not get quite where the hon. Member for Glasgow East wants us to with the age, I think there is more we can do to encourage them to opt in. We can discuss that as part of the consultation.

Trade unions were part of the original 2017 work, and I am very grateful to them for that. We have spoken to them frequently since, as we have to employer organisations. We will hold a series of roundtables now as we move towards the consultation, and we will involve them in the consultation. On timing, I would like to launch the consultation in the autumn, with this Bill going through, I hope, in the near future. I cannot say anything further than “mid-2020s”, I am afraid, but as soon as I am in a position to update the hon. Member for Reading East, I will of course do so.

Our objective is to maintain the broad political consensus for workplace pensions, which has been an important part of the success of the reforms since the beginning. The approach taken in the Bill to guarantee meaningful and detailed consultation to help implement the changes will help to build enduring support for this important work to boost the retirement aspirations of millions of our fellow citizens. Once again, I congratulate my hon. Friend the Member for Stoke-on-Trent North and I commend the Bill to the Committee.