Automatic Pension Enrolment

Paul Howell Excerpts

Wednesday 26th January 2022 Westminster Hall

[Paul Howell (Sedgefield) (Con)]

Does my hon. Friend agree that the opportunity to invest that money exists and could be pushed further, into local communities—particularly ones such as Sedgefield?

[Gareth Davies]

My hon. Friend is a great champion of Sedgefield. I am grateful for that intervention, and he is absolutely right. I have spoken before about the many ways in which we can use and mobilise private capital to pay for green technology and renewable energy, but decisions about where those infrastructure sites are have to be taken by local authorities wherever possible.

Today, though, the top point that I want to make in terms of all these benefits is that auto-enrolment has helped to bring about a cultural change in our society. When our economy does well, our savers do well. Automatic enrolment helps to democratise capital. It creates millions of new investors, millions of new capitalists. It is part of what, over many decades, people have called the property-owning democracy, ensuring that most of those who can vote have a stake in our economy. When they put an x in a box on a ballot paper, they have that in mind—they have skin in the game.

However, when a policy has such an impact and is so successful, it is right that we debate and discuss how we can build on that success. Many in this place have put forward suggestions—I pay great tribute to my hon. Friend the Member for North West Durham (Mr Holden) for his excellent private Member’s Bill—the Pensions (Extension of Automatic Enrolment) Bill—and to the work that Onward, in particular, has done—so let me add my name to those calls. Of all the options the Minister has in front of him, expanding automatic enrolment to those aged 18 to 21 will have the most material impact for our country. Automatic enrolment should be extended as a priority to young workers, because for them the potential compound interest is greatest, the pressures of demographic change are most acute, the challenges of mental health and climate change are especially relevant and the need for greater financial inclusion is most pressing.

The challenge for this age group is stark. Only 18% of eligible 18 to 21-year-olds are currently enrolled in a workplace pension.

[Paul Howell]

Does my hon. Friend agree that we need to ensure access to pensions for not just young people but those in multiple jobs who do not reach the £10,000 threshold in a particular occupation? In Sedgefield and the surrounding villages, there are many people in low-paid work who do multiple jobs to try to reach a certain earnings level.

[Gareth Davies]

My hon. Friend makes an important point. For the purposes of my remarks I want to focus on young people because, as I said, that will have the most material impact, but I know that others will speak about the points he raises.

Today, over four out of five 18 to 21-year-olds are missing out on the benefit of compound interest, despite belonging to the very group for whom the potential for exponentially increasing savings is the greatest.

--- Later in debate ---

[Paul Howell]

I am an accountant by trade. I contributed to a pension for a long time. My wife also contributed to a pension for a short number of years before we had our daughter. When I came to retire aged 56, just before I came to this place, we looked at the balance of the pensions and found she had made a disproportionate contribution in relation to the time that she had spent working, because it was right at the start. Does the hon. Gentleman agree that communicating with people about the importance of early and continuous contributions is vital? It is not just a triviality, as it is so important to the outcome at the end. Personally, I am benefiting massively from what happened at that early stage. I do not think we get the message out about how important this is for people. Does the hon. Gentleman agree that communications are important?

[Jim Shannon]

I thank the hon. Gentleman for his comments. He is right that it is best to make contributions from an early age. I can speak to that and the benefits of it. Even though I may not have understood that at that time, my mother was insistent, so I enrolled. Today, we see the benefits of all the things we did in the past.

To be eligible for a compulsory pension scheme in Northern Ireland, a worker must be at least 22, under state pension age and earning more than the minimum earnings threshold. I know some young people who have been paying into pension pots from as young as 18, but that is down the employer and employee discretion. I do not see a reason why young people who are in consistent work should not be contributing to their future, as referred to by the hon. Member for Sedgefield (Paul Howell).

As this subject is not taught in schools, young people feel unaware of the importance of taxes and pensions. I urge the respective Ministers to think about that in relation to schools. There may be a way of suggesting to young people at an earlier stage that they need to be making contributions, perhaps through an introduction provided while they are at school.