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Pensions Bill

I say straight away that I agree with the noble Baroness, Lady Hollis, that those who will be disadvantaged by the lower earnings limit are a key target for personal accounts policy. No one can doubt that. The Government have said that they estimate that around 350,000 individuals have multiple jobs, earn a total annual income of over £5,000 and do not currently contribute to a private pension. Like the noble Lord, Lord Oakeshott, I urge the Government to firm up on those figures because, as I said, they are an estimate. However, it is clear that a significant minority of these people—however many there are—will be women, for exactly the reasons that the noble Baroness, Lady Hollis, has just given us. It has been put to us that amending the use of the lower earnings limit so that it is retained for auto-enrolment but removed for contributions, will solve both the insubstantial contributions problem and the multiple jobs problem. The lower earnings limit of £5,035, combined with auto-enrolment, will create a scenario, we are told, where inappropriately small amounts will be contributed to personal accounts. Trivial contributions will be of limited use to savers and will be disproportionately expensive to administer. Secondly, the Bill rightly requires a separate application for each employment. However, the use of the lower earnings limit means that people holding multiple jobs will not receive employer contributions on the first £5,035 of their earnings in each separate employment, even if they were to enrol into a scheme with each employer. That clearly disadvantages those with multiple low-paid jobs. It is suggested to us that the lower earnings limit will remain as the point at which employees become auto-enrolled. However, there will also be the option to opt in to the scheme on earnings less than that and receive employer contributions. That is the whole point of the noble Baroness's amendment. All savers would receive employer contributions from zero, rather than from £5,035. That reduces the potential for inappropriately small balances to arise. The minimum contribution at 8 per cent for auto-enrolled scheme members would, I understand, be about £8 per participant per week. I mentioned earlier in our discussion my worries about costs of auto-enrolment to small and medium-sized enterprises. I understand that small business groups are beginning to come round to support the proposal, as the small contribution cost would be compensated by the significant reduction in administrative complexity. However, the important thing is that they are not there yet, so I am glad that this is a probing amendment at this stage—especially as small employers who do not currently have schemes are the ones who may very well object, because it will cost them quite a lot of money to create schemes. There is another problem that the noble Baroness did not mention with those ladies—usually ladies anyway—employed as housekeepers, daily cleaners and what have you, who would fall under the amendment. I am sure that the Minister will correct me if I am wrong, but I think that that would mean that those employers would have to contribute to the personal accounts scheme at the 4 per cent level. I repeat what I said—the noble Baroness, Lady Hollis, approved of me saying it—pensions are deferred wages. Honestly, I believe that the jury is out on the amendment and we will see whether there is general agreement among small and medium-sized enterprises, especially those that do not currently have schemes, that they could come on board. If not, I rather think that this will be a no-no.