Pensions Auto-enrolment

Debate between Mike Amesbury and Stephen Crabb

Wednesday 28th February 2018 Westminster Hall

[Stephen Crabb]

I agree with everything my hon. Friend says. Pension freedoms are great, but we want people to be well informed and educated about the consequences of the choices that will be available to them, particularly when it comes to drawing down large cash lump sums from their retirement pots.

Low opt-out rates are part of the success story of auto-enrolment, but let us not be complacent about them. So far, contribution rates have been very low. Those rates will go up this April and again in April 2019. Despite all the positive effects of increasing the minimum wage and raising the personal allowance threshold for income tax, there will be people on lower incomes who feel a financial pinch in their take-home pay, and opt-out rates may increase as a result. I encourage the Minister to monitor what goes on in response to the increase in contribution rates and to be ready to reinforce the strong positive messaging about the importance of employers and employees sticking with their pension arrangements so that they do not see that increase as a reason to get energised and look at actively opting out of the system.

My hon. Friend the Member for Chippenham mentioned young people. I strongly welcome the Government’s indication that they will look to lower the minimum age threshold to 18, but why 18? If 16 and 17-year-olds are working and earning £10,000 or more, why should they not also be captured by auto-enrolment and benefit from it? No 16, 17 or 18-year-old should leave school without basic education in what auto-enrolment is all about and without being equipped to make good decisions.

[Mike Amesbury (Weaver Vale) (Lab)]

As an ex-careers adviser, I certainly share those concerns. Education is vital. The right hon. Gentleman talks about a tipping point. If education were given at an earlier stage, people would make more effective and informed decisions at that tipping point, which is a key transition. Too many people see a pension as an unaffordable luxury. Education would help.

[Stephen Crabb]

The hon. Gentleman makes an extremely important point very well.

Let me make one further point before I conclude and allow other hon. Members to speak. My hon. Friend the Member for Chippenham appeared to indicate that she supports rates increasing above those that have been set out for April 2019. I absolutely agree: both employees and employers will need to make even greater contributions. It is easy to talk about that in this place, but it is much more difficult to get it across to the businesses and individuals affected, so I would be interested to hear what the Minister has to say about that. He is a brilliant Pensions Minister. I heard him speak in another part of the Palace earlier, and he has an incredibly strong grasp of the detail, which is exactly what we need from Ministers as we get to grips with the challenges of auto-enrolment.