National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Leigh of Hurley Excerpts

Consideration of Commons amendments and / or reasons
Wednesday 25th March 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I was disappointed that the Government sought to have all amendments passed by your Lordships’ House treated as engaging financial privilege. In light of this, we are unable to insist upon the amendments passed by your Lordships’ House. However, the issues we have raised remain of real significance. There is no sign that the Government have seriously engaged with the concerns we expressed. Significant features remain undefined.

The amendments we have brought forward today reflect a concern raised by many noble Lords on Report: crucially, that the Government have not undertaken the necessary analysis to understand how the Bill will affect basic rate taxpayers, those repaying student loans, and SMEs and charities.

The most worrying thing about the Bill is that it will reduce the incentive to save, particularly among the less well paid. Whether Ministers like it or not, it strikes at the heart of this and will inevitably reduce pension adequacy. The Minister himself has admitted that many of those paying the basic rate of tax and even some earning under £30,000 a year will be affected.

Not only will the Bill affect savers and pensions adequacy, it will impose costs on businesses and charities. The detail on these points is, concerningly, seriously lacking. Our three amendments in lieu and the consequential amendments dealing with Northern Ireland require a proper assessment of the projected economic and behavioural impact of this policy on those three groups. Crucially, this work has to be carried out before the Act comes into force.

First, for basic rate taxpayers there is a very real concern that this policy will reach far beyond those it is ostensibly aimed at. Individuals on modest incomes—those paying tax at the basic rate—may find themselves drawn into its effects. They are ordinary working people, often making careful decisions about how much they can afford to save. Yet we have not seen a clear assessment of how their net incomes will be affected, how their pension-saving behaviour may change or what this will mean for the adequacy of their retirement incomes.

Secondly, for those repaying student loans, the interaction between salary sacrifice, pension contributions and student loan repayments is not straightforward. There is a real risk here that some individuals repaying student loans could face higher effective deductions from their income or altered incentives around saving for retirement. Our amendments would ensure that the Government properly assess the impact of these interactions.

Thirdly and finally, small and medium-sized enterprises and charities are the backbone of our economy and our communities. They operate with limited margins and limited administrative capacity. Changes to employment costs, compliance requirements or remuneration structures can have tangible effects on hiring, wages and growth.

The Government must be able to answer these questions. By how much will this Bill increase their costs? Will it change employment practices? Will it have an impact on wage growth or the critical area of job creation? This Bill would change how people save, how employers structure pay, and how organisations make decisions.

Our amendments would simply require the Government to set out clearly and transparently what the effects are expected to be. They would offer the Government a constructive way forward and would seem to get round the problem of financial privilege. In responding, it would be helpful if the Minister could explain more clearly precisely why these provisions do not come into force until 2029. It looks as if this matter is regarded by the Government not as a serious measure but as a nasty present to their successors.

[Lord Leigh of Hurley (Con)]

My Lords, I will speak briefly to this group of amendments in lieu. I am grateful to my noble friend Lady Neville-Rolfe for returning these issues to the House despite the very disappointing decision to cloak all our previous amendments in the financial privilege. Up and down the country, SME businesses are horrified by this. They have had a wall of difficult legislation sent their way, such as the national insurance increase and the Employment Rights Bill, so they have not focused on this, but those I talked to who have focused their mind on it are very unhappy to say the least with the possibility of this Bill affecting their business.

I want to focus on one particular issue. We have heard repeatedly in recent weeks of the position facing graduates repaying student loans, which is simply not fair. For those on plan 2 loans in particular, the picture is particularly stark: an anaemic jobs market, high rents, high living costs and, on top of that, what amounts to a 9% graduate tax with interest rates of around 6.2%, meaning that for many, full repayment is not possible. I urge the Minister and others to speak to their children or their grandchildren who will tell them that they are put off by this Bill.

This policy now risks making the matter worse. It threatens to increase the effective burden on graduates precisely when they are trying to do the right thing by saving for their retirement through salary sacrifice. They see the costs that are ahead of them when they retire. For many, particularly recent graduates, disposable income is already stretched to the limit with rents and the cost of living, so they have little scope to save beyond the auto-enrolment minimum, which, as we have heard, is insufficient to provide savings for their longer life. If the Government undermine the salary sacrifice regime, they risk entrenching a generation who simply cannot afford to save enough for their retirement.

In conclusion, that is why this amendment from my noble friend matters. It asks the Government to do what they should already have done: properly assess the impact of this policy in relation to student loans. I do not think anything the Minister said specifically addressed the issue of the impact on students. I did not see it in any of the Explanatory Notes or anywhere else. It may have been because they did not think it affected it or they did not realise it, but it has not been done. In the absence of that work, the least the Government can do is pause and consider the long-term consequences before pressing ahead. The Treasury now has the opportunity and the responsibility to get this right. I urge the Minister and all other Peers to do so.

[Lord Londesborough (CB)]

My Lords, I rise to throw my support behind the four Motions in the name of the noble Baroness, Lady Neville-Rolfe. I will be brief. Is the Government’s apparent resistance to the impact assessments proposed in these amendments in any way connected to the fact that the measures in this Bill will not take effect until 2029? The Secretary to the Treasury stated in the other place on Monday, while rejecting all of the Lords amendments, that,

“the status quo is indefensible”.—[Official Report, Commons, 23/3/26; col. 84.]

If that really is the Government’s view, why are we waiting three years to bring in the pension gap? But, since we do have this three-year gap, there is happily plenty of time for the Government to prepare economic and behavioural impact assessments, and it would surely make sense to do so.