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Pensions Bill

I thank the noble Lord for the opportunity to put clearly on the record what the clause is about. It provides a regulation-making power to delay automatic enrolment for any or all employers, schemes or jobholders. We intend to use the regulations to establish a deferral of automatic enrolment for a short period—most likely, for three months—for employers who offer high-quality provision. To minimise risks of discrimination, we plan to require employers to keep the jobholder in a higher level scheme for a minimum period so that they can make up for any savings foregone during the delay. Three technical government amendments to Clause 4 have been made, which are grouped with amendments to other clauses that have been discussed—Clauses 2 and 3. The Committee will be aware that those amendments work in conjunction with Clauses 2, 3 and 5. However, I am happy to discuss the policy intention behind Clause 4 more generally at this point. Our general approach is for immediate enrolment so that people who change jobs frequently, together with casual and seasonal workers, have the best possible access to pension saving and the prospect of building a sufficient pension pot. However, we recognise that some employers voluntarily pay higher contributions, or provide defined benefit schemes and that in the longer term this benefits their workers. In order to encourage such employers to maintain their generous offers, once automatic enrolment is introduced, we intend to allow them to defer automatic enrolment by a short period. That is why it is crucial to have the power to permit this under the legislation. It would not be appropriate to allow all employers to delay automatic enrolment. Analysis suggests that people, on average, change jobs eight times during their working life. Enabling all employers to delay automatic enrolment for three months, for example, could reduce the fund of an individual in a minimum-level qualifying scheme who moved jobs eight times in their working life by as much as 5 per cent. This clause will enable us to set out arrangements for employers to make use of a deferral period, including the length of any period and the level of contributions required. The deferral period is a measure to support employers in maintaining higher-value provision. Using regulations will enable us to review arrangements to ensure that the approach is succeeding in supporting higher-level pension provision for both employers and workers. The clause also stipulates that, in order to ensure that members who are automatically enrolled later benefit from generous provision, employers must maintain membership in the scheme for a minimum period. This protection is crucial because people need to catch up foregone savings that they would have received if they had been automatically enrolled into a scheme with minimum contributions from the outset. Our intention is that the minimum level of employer contribution to allow employers to postpone will be 6 per cent of qualifying earnings, that is double the minimum. On that basis, we expect that employers offering these higher contributions or qualifying defined benefit schemes would be able to postpone automatic enrolment for about three months. However, we propose that the level of contributions, the length of the postponement period and the length of the catch-up period is agreed in secondary legislation, as this gives us the opportunity to continue to consult ahead of laying regulations. There is a relationship between the length of the postponement period—the catch-up period—and the level of contributions required. If we were to fix some conditions for postponing automatic enrolment in the Bill we would restrict the flexibility to tailor the arrangements to meet the dual needs of both jobholders and employers in the future. I hope that has clarified matters for the noble Lord. It is a way of supporting existing good quality provision. That is the purpose of the clause.