Pensions Auto-enrolment

Nigel Mills Excerpts

Wednesday 28th February 2018 Westminster Hall

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate my hon. Friend the Member for Chippenham (Michelle Donelan) on securing this important debate. I will not waste my precious five minutes by recounting the triumphant statistics on how successful auto-enrolment has been, but about 1,250 businesses in Amber Valley have been enrolled and about 13,000 of my constituents now have access to a workplace pension for the first time, which is a very important achievement.

It is important to look at where we can go in future. I have been through the important work of the auto-enrolment review. There are so many great ideas in there. My only slight frustration is that it will take so long to bring them all into force. I accept that we have not even finished the roll-out, we have not done the escalation and there is not much time in Parliament, but some of the ideas are important. Perhaps the mid-2020s is a little later than we could achieve them by.

We need to find a fix for people who have multiple jobs but are earning under £10,000 in each of them, so are not enrolled by any of their employments. There probably are not that many people with two jobs that sit perfectly under that, but bearing in mind that we have a tax coding system—we tell employers every year, via Her Majesty’s Revenue and Customs, how much personal allowance they can give each employee and how much tax to take off—it does not strike me as beyond the wit of man to put on that coding notice how much pension contribution they ought to pay. Not much data would be given away. We could just say that a person has sufficient income elsewhere, so the employer should enrol them and pay a full contribution. I hope that can be looked at.

I agree with my hon. Friend that we need to find a system for the self-employed, although I am not sure that we can force it into auto-enrolment, because the whole idea of inertia will not work. I am a little more cautious than her, because I am not sure how we could square having a much lower national insurance rate for the self-employed with giving them a pension contribution in excess of what we give people who are employed and earning the same income. That may be a step too far.

I tend towards a default from the tax system. If the Government move forward with making tax digital and requiring quarterly returns, that may take out some of the big annual bills to pay if there is just a default on the annual returns. Perhaps the way forward is having a default quarterly system where the self-employed could be encouraged to take a pension contribution of the right percentage. I am not sure how we fix choosing them a pension scheme. I suspect that, if we did that, we would have to choose NEST as the default option. The Government should be a bit cautious about defaulting people into an individual scheme. If that scheme goes wrong, they will get the blame for returns not being right.

Even if we get to the 8% that we are due to get to in a couple of years without seeing opt-out rates go far higher, that will still not be enough pension saving for most of those people to have the savings that they need for their retirement. We will have to do more to encourage people to put more into those pension schemes. The trick to that has to be greater engagement. I hope the Government will take forward the dashboard as a key part of that, so that people can understand what they have in pension saving across myriad pots.

We need clear and consistently applied savings targets so that people know how much they should have saved by the time they reach 35, 40 or 45, and understand how much they have saved for their pension, what that means and how much more they ought to save. That is the missing link. I get my annual pension statement and I have no idea whether it is good. It sounds great that I have a few thousand pounds—that sounds like a great asset—but what does it really mean in pension terms? How much more do I need? How much do my peers have? A system with clear guidance about how much people should save and what that really means would boost pensions engagement.