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Pensions Bill

moved Amendment No. 24: 24: Clause 7, page 4, line 26, leave out subsections (2) to (6) and insert— ““(2) If the jobholder gives notice under this section— (a) the jobholder is to be treated for all purposes as not having become a member of the scheme; (b) any contributions paid by the jobholder, or by the employer on behalf of the jobholder, must be refunded in accordance with prescribed requirements. (3) Regulations under subsection (2)(b) may, in particular, make provision about— (a) the time within which contributions must be refunded; (b) how the amount to be refunded is calculated; (c) the procedure for refunding contributions. (4) The Secretary of State may by regulations make further provision in relation to notices under this section. (5) The regulations may in particular make provision— (a) as to the form and content of a notice; (b) as to the period within which a notice must be given; (c) as to the person to whom a notice must be given; (d) requiring any person to make prescribed arrangements for enabling notices to be given; (e) requiring any person to take prescribed action in consequence of a notice (in addition to any action prescribed under subsection (2)(b)).”” The noble Lord said: In moving Amendment No. 24, I shall speak to the other government amendment and respond to the further amendments in the group. Automatic enrolment creates a new presumption to save, but workplace pension saving will not become compulsory. Individuals will still be able to choose whether to participate in pension saving, and our aim is to ensure that any decision not to participate is an active one, not the default. Clause 7 provides jobholders with the right to opt out of workplace pension saving. Amendment No. 24 will ensure that the Government will be able to prescribe the process by which a jobholder opts out, including when and to whom they give notice. The drafting of the clause has also been simplified to aid understanding. Amendment No. 33 clarifies that an opt-out notice may be authorised as well as signed. This is to ensure that we do not inadvertently rule out the possibility of electronic communication. However, we will ensure that any use of electronic media to authorise and process opt-outs cannot be misused by employers in any way that undermines participation when we come to prescribe the opt-out process in regulations. Amendment No. 28 would mandate that an opt-out notice would have effect only if it was given direct to the scheme administrator, thereby ruling out any other arrangements. We need to ensure that employers do not coerce their jobholders to opt out. An employer should play no part in the jobholder’s decision-making process. However, when a jobholder does opt out, the deductions from their wages will need to be stopped, so the employer will need to know, perhaps quite quickly. At this stage, we think it is important to retain flexibility to assess all options, taking into account the needs of jobholders, their employers and pension schemes. We shall set out our proposals for the detailed process when we come to make the regulations under this clause. The opposition amendments seek to do a number of things, the first of which would be to ensure that jobholders may retain any enhanced protection from tax charges on existing pension pots that exceed the lifetime allowance introduced by the 2006 A-Day reforms if they opt out. Jobholders who opt out under Clause 7 will statutorily be treated for all purposes as not having become a member of the scheme into which they were automatically enrolled. The key words are ““for all purposes”” as these ensure that any enhanced protection due to a jobholder remains intact if they opt out. These amendments also remove the right to a refund, which is an important part of the process of unwinding membership. Our intention is that any contributions paid by jobholders who opt out under Clause 7 will be refunded to the jobholder. Similarly, any contributions paid by the employer will be refunded to the employer. However, it is too soon to say how the refund of contributions will operate or, for example, to assess the full implications for tax purposes. The first destination of a refund of jobholder contributions may need to be the jobholder’s employer to enable income tax to be deducted from earnings, which is now payable because it is not a pension contribution and therefore no longer eligible for tax relief on pension savings. We may also need to maintain some flexibility around the handling of refunds of employer contributions. For example, some employers choose to leave their contributions at the disposal of the scheme trustees when a worker opts out either as a contribution to administration costs or to be used by the trustees for the benefit of the members. This is a highly technical area, and procedures for handling the return of contributions will be a matter for further detailed consultation with stakeholders as we develop the regulations. However, I want to make it clear that whatever the regulations prescribe for the process, the refund due to a jobholder will find its way back to that worker, while the employer’s contribution will go to the employer. Getting the length of the opt-out period right is extremely important, and the Government have a balance to strike in this regard. Some jobholders may find it helpful if the period were long enough for them to experience the impact of pension saving on their pay while they still have time to opt out. However, the central thrust of these reforms is to facilitate and support participation in workplace pension saving, so we do not want an unnecessarily long opt-out period to result in jobholders who might otherwise have participated to waver and opt out after, say, three months. In addition, employers and schemes should not be kept waiting too long to discover who is in and who is out. Either way, there is nothing in the Bill which limits the length of the opt-out period in any way or stipulates that it must be same for all jobholders. I suggest that we return to this issue when the time comes to set the period through regulations. We want to make sure that people who are considering whether to opt out fully understand the implications of such a decision. This is why the opt-out notice should include information about the effect of opting out, which may also provide jobholders with an element of protection against employer coercion. While we want to ensure that an opt-out notice may be authorised as well as signed, we will ensure that any use of electronic media to authorise and process opt outs cannot be misused by employers in any way that undermines participation. I beg to move.