Automatic Pension Enrolment

Simon Baynes Excerpts

Wednesday 26th January 2022 Westminster Hall

[Simon Baynes (Clwyd South) (Con)]

It is a pleasure to serve under your chairmanship, Mr Dowd. I thank my hon. Friend the Member for Grantham and Stamford (Gareth Davies) for bringing this very important debate to Westminster Hall this morning. I am not declaring an interest but, like other hon. Members present, I was involved in the financial world in a previous life, having worked for 25 years in the financial services industry. I have also been a trustee of several charitable investment portfolios, and served as a member of the pensions and investment committee on Powys County Council during my time in local government.

I fully support the point made by my hon. Friends the Members for Grantham and Stamford and for Sedgefield (Paul Howell) that the issue of auto-enrolment is not only about benefiting employers and employees, but about the huge amount of capital that builds up in those funds and the constructive way that it can be invested for social and environmental good, and for the general improvement of the economy.

Much mention has been made of the statistics showing the remarkable transformation of the pensions industry since the introduction of auto-enrolment, so I will not go on at length about them. However, I would like to pull out one or two contrasting statistics. We have heard that nearly 90% of employees are now workplace pension members, compared with only 50% in 2012 before auto-enrolment was introduced. Auto-enrolment has resulted in a significant increase in pension membership, particularly of defined contribution schemes—another very important aspect. The statistics carry on; they are extremely impressive. The hon. Member for Strangford (Jim Shannon) has alluded to that, so I will leave it there.

The introduction of auto-enrolment has been what I would consider to be a quiet revolution. It has helped to normalise pension saving in my constituency of Clwyd South and elsewhere in the UK, increasing the proportion of people who see pension saving as a good thing and who say they know where to go if they want more information.

That is another vital aspect of auto-enrolment: it is about not only the amount of money and the level of take-up, but a cultural change that has huge benefits for the country in the long term. A recent British social attitudes survey found that 79%—a majority—of individuals interviewed viewed automatic enrolment as a good thing for them, 77% agreed that saving into a workplace pension was normal for them, and 75% knew where to go to find out more about workplace pensions. That reinforces my point about the cultural change that is so vital in this process.

Another point that is vital to draw out in this debate is that the latest data suggests that auto-enrolment has reduced some of the regional disparities in workplace pension participation. Figures from 2020 show that rates of employee workplace pension participation are fairly consistent across the UK, with little geographic variation. Regional data prior to auto-enrolment is not available, but the continued roll-out of auto-enrolment over the last five years has been accompanied by increased rates of participation by private sector employees in regions other than London and the south-east, which is hugely important to many hon. Members who represent seats far away from the south-east of England.

Another important point emerged from the 2020 study by Karen Arulsamy and Liam Delaney, “The Impact of Automatic Enrolment on the Mental Health Gap in Pension Participation: Evidence from the UK”. It showed that, particularly for people who are not particularly experienced in financial matters, auto-enrolment has completely removed the mental health gap in pension participation.

Finally, the private Member’s Bill introduced my hon. Friend the Member for North West Durham (Mr Holden) is absolutely vital, particularly for my constituency of Clwyd South, where auto-enrolment figures are good but could be higher. There are 1,040 employers involved in auto-enrolment and 3,000 job holders. That is, in a sense, connected to the points raised by my hon. Friend the Member for North Norfolk (Duncan Baker), because my constituency has a real mix of different employment patterns. Like his constituency, tourism and hospitality are important parts of the employment make-up of Clwyd South. There are many young workers and people working part time who fit their jobs around their families and other considerations.

I am sure my hon. Friend the Member for North West Durham will be speaking later, but I want to quote one thing that he said:

“three quarters of those aged 22-plus are auto-enrolled into pension schemes, but under the age of 22 it is only 20%...of people in work, not students. That is a big difference, and the difference that auto-enrolment has made since 2012. For part-time workers, while some will earn more than the £10,000 threshold, auto-enrolment is 57.8% compared with almost 90%”

—as has been established earlier—

“of workers in full-time jobs. If we assume a similar take-up, the Bill could see an extra 30% of the part-time workforce auto-enrolled”.

The other point he makes, which again goes back to a point I made earlier, is that an

“extra £2.77 trillion…would be invested in our pensions for the lower-paid and younger workers”.—[Official Report, 5 January 2022; Vol. 706, c. 81.]

It benefits not only them and their families, but the general economy.

In conclusion, I am delighted that we are discussing this important issue. As I said, it is a quiet revolution that brings hope and comfort to many families, particularly among those who are not particularly experienced in financial matters, and adds greatly to the prosperity and health of the economy of the United Kingdom.