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Pensions Bill

I shall speak to government amendments in this group and to Amendment No. 5, which I ask the Committee to reject. Automatic enrolment will establish the presumption to save as the new default. However, we need to ensure that employers do not enrol their workers one day then look for ways in which to take them out of workplace pension saving shortly after. Clause 2 prohibits employers from acting, or failing to act, in any way that results in the loss of active membership for a jobholder. The compliance regime in Chapter 2 will apply in respect of the employer duty in Clause 2. Breaches of the duty may, where necessary, result in the Pensions Regulator taking enforcement action in the form of compliance and penalty notices. Government Amendment No. 6 extends this prohibition to actions, or failed actions, of the employer that would result in a jobholder scheme losing its status as a qualifying scheme. This will provide additional security for the jobholders and help to ensure that continuity of good-quality pension saving is protected. For example, some employers like to be able to retain an ability to control their costs, by varying either contribution rates or the definition of pay on which contributions are calculated. Such employers who offer money purchase arrangements could use that ability to reduce the amount that they are otherwise required to contribute to meet the duty, thereby subverting the duty without terminating active membership. Opposition Amendment No. 5 would remove the element of the clause relating to employer omissions. We are clear that it is inappropriate to allow employers to benefit by failing to do what they are required to do, either deliberately or accidentally. Employers should be held responsible if they terminate scheme membership, even if that is by accident. Some pension providers may require an employer to keep their employee details up to date. We do not want a failure by an employer to provide such details to result in the termination of the active membership for any of their jobholders. This amendment, however, would undermine the duty on employers to maintain active membership of a scheme and could increase the number of jobholders who come out of pension saving without having made the decision themselves. That would undermine the central objective of these reforms. The Government recognise that some employers voluntarily pay higher contributions or offer schemes with high benefits significantly above the default. We recognise that, in the longer term, this is to the advantage of their workers and we want to support these employers to continue to do this. Clause 4 therefore enables an employer offering higher-quality pension provision under the employer duty to be able to defer automatic enrolment for any or all of their jobholders for a limited period, the details of which will be set out in regulations—for example, the length of the period. Amendments Nos. 13 and 14 ensure that an employer who takes advantage of the facility to defer automatic enrolment must guarantee membership of the higher-quality scheme for a minimum period. If an employer is unable to maintain membership of the higher-quality scheme, through no fault of their own or of jobholders, regulations made under a new clause to be introduced by Amendment No. 21 will require the re-enrolment of a jobholder into alternative higher-quality provision within a set timeframe. Therefore, I urge the noble Lord either to withdraw Amendment No. 5 or ask for it to be rejected. The noble Lord asked a number of questions about the costs of automatic enrolment and re-enrolment. The whole thrust of these provisions is to make sure that the arrangements are efficient and low-cost and we do not want to impose undue burdens on employers. We are not at a stage to be precise about what the process will be and quite how it will proceed. We will be looking in part to PADA and its work to advise and help us to develop these arrangements. However, the noble Lord makes a good point: we need to ensure that we do not impose undue burdens on employers by this process. There is no reason to assume that the process necessarily would, but those details have yet to be worked out and the matter will be developed in the coming months. We are absolutely convinced on the essence of the Bill, which is that auto-enrolment is the route by which we deal with the current inertia whereby so many people are prevented from saving.