Pensions

Guy Opperman Excerpts
Monday 1st March 2021

(2 months, 2 weeks ago)

Commons Chamber

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Department for Work and Pensions
Guy Opperman Portrait The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
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I beg to move,

That the draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2021, which was laid before this House on 20 January, be approved.

It is a great privilege to be here in the House to move the motion. This order reflects the conclusions of this year’s annual review of the automatic enrolment earnings threshold required by the Pensions Act 2008. This is the ninth annual review. The review considered the earnings trigger and the qualifying earnings band for the tax year 2021-22. The earnings trigger determines the point when a qualifying worker becomes eligible to be automatically enrolled into a qualifying workplace pension. The qualifying earnings band determines the earnings upon which workers and employers pay contributions into a workplace pension. This order sets a new upper limit for the qualifying earnings band and is effective from 6 April 2021. The lower earnings limit is not changed. Similarly, the earnings trigger is not changed.

The Government’s commitment to automatic enrolment was demonstrated through the support for the statutory minimum employer pension contributions originally included in the coronavirus job retention scheme. I thank everyone who continues to support automatic enrolment, whether that is the participating employers or, more particularly, the 10 million-plus employees who are saving 8% per annum. I can confirm that we will be pursuing the 2017 automatic enrolment review and bringing that in in the mid-2020s. The 2019 stats show the success that is automatic enrolment, with women in workplace pension participation now at 86%—that was 40% in 2012—and young people between 22 and 29 in workplace pension participation now at 86%; that was 35%. I commend the order to the House.

Matt Rodda Portrait Matt Rodda (Reading East) (Lab)
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I thank the Minister for his remarks. Auto-enrolment has proven to be one of the most positive developments for savers and in securing people’s long-term prosperity in recent memory. It was a Labour Government in 2008 who first introduced legislation to require auto-enrolment, and millions of people have benefited since. It is heartening that the current Government appreciate the value of the scheme, and are committed to continuing and, indeed, expanding it.

The current economic climate is a tough one. The coronavirus pandemic has left many employers and employees facing unexpectedly difficult decisions. In this light, it is right that the Government focus on ensuring the long-term sustainability of schemes and helping employers weather the immediate crisis. It is for this reason that Labour will not be voting against the statutory instrument tonight, even though it only represents a relatively small real-terms increase in the number of employees set to be automatically enrolled by their employers into pension schemes and a small real-terms increase in the earnings that employers must pay contributions on. I would like to take this opportunity to urge the Government not to abandon the ambitious spirit in which the original legislation was introduced in 2008, and to make sure that, once the economy has regained its strength, the Government do all they can to ensure workers are saving more and are saving earlier for their retirement.

Many experts have made the case for lowering the qualifying earnings threshold and, indeed, the minimum age. The People’s Pension, for example, has endorsed proposals to do so. It argues that millions of new savers would be created, many of whom would be women and people from ethnic minority backgrounds. Similarly, the Association of British Insurers found that employees would be able to save an additional £2.6 billion a year if the earnings trigger was scrapped. At a glance through Hansard, we can see that a large number of colleagues, many of whom have expertise in this area, from all major parties and in both Houses have also called for these changes. In fact, I remind the Government that they made a commitment themselves in 2017, in the review of auto-enrolment, among other things to remove the lower earnings limit and to reduce the age threshold for automatic enrolment to 18 by the mid-2020s. It would be disappointing if this goal could not be met on time or soon after, and I urge the Government to clarify their position on this issue.

It is also important that the Government are clear about the implications of freezing the earnings trigger and only modestly increasing the upper limit for the qualifying earnings band. Labour has pushed for this in previous years, pointing out last year, for example, that 37% of female workers and 28% of black and minority ethnic workers are still not eligible for the scheme. This is an area of pensions policy that I urge the Minister to look at most closely.

I would like to use this opportunity to provide some context for the decision that we are being asked to make tonight. We will see how the roll-out of the pensions dashboard in the not-too-distant future may benefit savers and we must do all we can to ensure that this service lives up to its potential. Similarly, it is right to work hard to continue the fight against pension scams, to increase the take-up of pension credit and to give savers more transparency around their investments. I would also like to take this opportunity to remind the Minister of a commitment that he made to my predecessor, my hon. Friend the Member for Birmingham, Yardley (Jess Phillips), about meeting the Allied Steel and Wire pensioners group, which is very concerned about its pension scheme.

I should also say that Labour supports the pensions triple lock as a way of ensuring a fairer state pension, and that we will be working hard in the coming months and years to continue to push the Government to take bold steps to use the economic might of pension funds to support the fight against climate change. I have raised these points to emphasise that there is much to do in the pensions and savings sector, and because I believe that it is important to consider the whole picture when taking big decisions such as the one being made today.

Labour wants to make this the best country in which to grow old. If we are to achieve that goal, we must be ambitious and build on the success of auto-enrolment to make it as good as it possibly can be. We should address the other issues that I identified earlier as part of that work.

--- Later in debate ---
Jim Shannon Portrait Jim Shannon (Strangford) (DUP) [V]
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It is clear that automatic enrolment for pensions has been a good thing for many people, so I am pleased to add my support for the measure. The Library briefing puts it succinctly:

“The policy has reversed the decline in workplace pension saving. The rollout of automatic enrolment from 2012 onwards has led to a tenfold increase in total membership of defined contribution occupational schemes, from 2.1 million in 2011 to 21 million in 2019.”

That is a success story if ever there was one. The briefing continues:

“Actively contributing membership rose from a low point of 0.9 million active members in 2011 to 10.6 million members in 2019.”

Success indeed! Employers who had to furlough staff because of coronavirus could claim help for pensions contributions before 1 August 2020. Since then, however, they have had to meet costs themselves both for furloughed hours and hours worked. May I ask the Minister whether that will be looked at and changed or reviewed, as it has left some employers in a difficult position? While many have been able to access grant schemes for their closed businesses, anyone who owns more than one shop in Northern Ireland only receives a grant for one business—no matter that their staff could be employed in four shops or even more.

There is absolutely pressure on employers at this time, which will increase if staff earn less than the required lower limit. I personally believe that while we should look at the lower earnings limit, as other Members have said, I am thankful that that is reviewed annually. That is important, and it is good to see that in place. This is not the time to put more pressure and obligations on employers, and I believe that this year we should keep the limit as it is. Some companies will need help to get back on their feet for the next six months, and will find themselves in completely new circumstances next year. Making a small employer’s contribution for a staff member on low hours should not be a final nail in the coffin.

I support everyone who works to have access to a private pension scheme, but I truly do not believe that this is the time to implement a change. I hope that the Minister will confirm in his response that the Government will support employers in every possible way over the coming months, knowing that we will reap the rewards with thriving businesses in the years to come if we sow and till now. Never has that been more necessary, as the covid-19 pandemic has illustrated.

Guy Opperman Portrait Guy Opperman
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It is a great honour and privilege to respond to the debate. As always with pensions, while we are engaging in a debate on a specific topic colleagues across the House never miss the opportunity to raise all manner of issues on pensions, to which I have been asked to respond. I am delighted to do so.

No sooner has Her Majesty signed the Pension Schemes Act 2021 on the dotted line—we thank her tremendously for that, and I thank the House for its endorsement of that wonderful piece of legislation, which will make our pensions safer, better and greener—than colleagues are urging me to bring forth another pensions Bill to further transform the pensions landscape. I am sure that those on the Treasury Bench, and the Deputy Chief Whip and the pairing Whip, will have taken due attention of that when bids for future legislation are put in.

Tom Hunt Portrait Tom Hunt (Ipswich) (Con)
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In a very practical sense and meaningful way, how do these reforms make a real difference to my constituents in Ipswich?

Guy Opperman Portrait Guy Opperman
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My hon. Friend is a champion for his constituency and rightly raises the importance of what we are doing. I draw his attention to two key points: first, the Pension Schemes Act will make his constituents’ pensions safer, better and greener; and secondly, the automatic enrolment reforms that we have brought forward as a coalition Government and then a Conservative Government unquestionably support his constituents, who are saving in their thousands, to the tune of 8% per annum.

Of course, my hon. Friend will be aware that in 2012, approximately 35% of our young people were saving into a workplace pension, and now 86% in his community are doing so. Similarly, women, who were saving at 40%, are now saving, quite obviously, up at 86%, as I outlined earlier.

Mark Francois Portrait Mr Mark Francois (Rayleigh and Wickford) (Con)
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Very quickly, I have a compliment and a question. The compliment is that, as an MP of 20 years’ standing, I know that pensions are one of the most difficult things that we get inquiries on from constituents, and the Minister, when he replies, has a knack for explaining these things in everyday English that is simple to understand. I thank him for that.

Guy Opperman Portrait Guy Opperman
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Stop there!

Mark Francois Portrait Mr Francois
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My question is this. The very helpful notes that go with the instrument state:

“A full impact assessment has not been produced for this instrument.”

We were not expecting “War and Peace”. There will be a reason why the Government took that decision; perhaps the Minister will explain it to the House.

Guy Opperman Portrait Guy Opperman
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As always, I am grateful for my right hon. Friend’s intervention and support, and for his kind comments. I accept and take any praise that is due, and likewise hope that all Whips have taken due note of that.

Mark Francois Portrait Mr Francois
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Stop there!

Guy Opperman Portrait Guy Opperman
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Indeed. The practical reality is that I will write to my right hon. Friend with more detail about the impact assessment, but clearly, this is an annual review that is done on an ongoing basis to ensure that the automatic enrolment regulations should be enforced in an appropriate way, and they should be reviewed and assessed in an appropriate way.

Some colleagues have raised matters of the Budget, and I leave that to my right hon. Friend the Chancellor. Similarly, the hon. Member for Strangford (Jim Shannon), whose comments we always appreciate—it is an honour to respond to the great man—asked for a specific assurance that the Government will continue to support employers. I can give him the profound assurance that my right hon. Friend the Chancellor on Wednesday will continue the massive support that this Government have made to employers on an ongoing basis. That will continue.

Clearly, we work on an ongoing basis to implement by the mid-2020s the automatic enrolment review; we continue to work forward on the pensions dashboard; section 125 of the Pension Schemes Act has made a significant difference on pension scams; and we continue to put climate change at the heart of pensions, which are now safer, better and greener under this Government.

Question put and agreed to.

Royal Assent

Nigel Evans Portrait Mr Deputy Speaker (Mr Nigel Evans)
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I have to notify the House, in accordance with the Royal Assent Act 1967, that Her Majesty has signified her Royal Assent to the following Acts:

Covert Human Intelligence Sources (Criminal Conduct) Act 2021

Ministerial and other Maternity Allowances Act 2021.

We will now suspend for a brief moment in order to sanitise both Dispatch Boxes.