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Pensions Bill

I support the amendment and only wish that the noble Lord had gone further. I would like to see personal accounts, as structured for those over 22 and with auto-enrolment, being available for people at the age of 16. Let me explain why. I read the House of Commons debates and, as far as I could see, the Government’s main concern, which I can understand, is that there is a lot of job movement at that age; therefore there is a significant hassle factor and it is possibly not worth doing. I am not sure that I accept that, because the whole point of personal accounts is to produce the pot that you take with you. Therefore, after the initial hassle of setting it up, you should be able to port it with you. There are two, possibly three arguments that I ask my noble friend to consider. I understand that you can voluntarily enrol but I should like to go beyond that. The first point is to instil as early as possible the habit of saving. If you are in a job at the age of 18 or 21 and are not contributing to a pension, and then suddenly at the age of 22 auto-enrolment arises and you experience a drop in income, there may well be an increased psychological willingness to opt out. However, if the habit of saving has been instilled in you and you pay your pension contribution along with your tax and national insurance from the first day that you are in work, and you are above the LEL, the sums involved will be quite modest. Often, they will be only £3 or £5 a week for the employer or the employee on, say, half-median earnings. We are talking about quite modest sums, but the habit of saving will be in place and there will be less risk of dropping out from the option of auto-enrolment at the age of 22. The second point is that it really is worth making those contributions. I am not confident about my statistics, as I have been trying to work them out myself, and I defer to PENSIP or any other model. For example, you would normally save on half-median earnings—which for a woman is about £11,000 a year—for 30 years in a personal account. However, I calculate that if you started six years before that, you would add 50 per cent to your total pot or possibly more because you would have started at a young age and would have a much longer investment return. That is particularly salient for women because their peak earning age is 29, as opposed to 42 for men, because they are most likely to earn before they have children. When they have children, half of them stop contributing to a pension. Therefore, for young women, in particular, who may be training to become a hairdresser, for example, it is key that we increase the number of years in which they are likely to contribute to a pension before they settle with a family, which almost always adversely affects their pension contributions. For those reasons, I am not sure that the hassle factor is a substantial argument. It is desirable to inculcate the habit of saving, rather than risk people failing to auto-enrol at the age of 22 because they are not used to making payments. That is the case, above all, because those six years of early return can increase the value of a 30-year pot by something like 50 per cent. That is particularly important for low-paid women who may be part-time workers. I hope that my noble friend will reconsider this matter, and I shall be bringing forward something similar in a later amendment. Obviously, the scheme is discretionary and a young person can contribute if they wish, but what I should like to see is that where that young person ““does””, the employer ““must””. In that way, the scheme would be made worth while. I hope that the noble Lord, Lord Skelmersdale, will accept a wider interpretation than he may have originally intended with his amendment. I also hope that my noble friend can take this matter away and think again about the outcome that we want, which is to ensure that low-paid people who work part time—women in particular—retire with the best possible pension. We should do everything we can to ensure that they start paying in as early as possible and as easily and continuously as possible, and this amendment could be a means of achieving that.