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Pensions Bill

As the Minister said, the Lords have tabled a great many amendments to the compliance regime. Some are minor, but a number are fairly important. I pay tribute to Lord Skelmersdale and Lady Noakes, who did a good deal of hard work on many of them. Much of that work involved trying to dilute the Government's affection for introducing punitive measures in almost all areas if they think they can get away with it. Because much of the detailed work and the heavy lifting has already been done in the House of Lords, I intend—with no disrespect to their Lordships—to speak fairly briefly on this group of amendments. I think it fair to say that the issue of enforcement of compliance was always going to pose a substantial challenge to the legislation, particularly in regard to micro-employers. The new regime for personal accounts and auto-enrolment will apply to the fish and chip shop, the hairdresser and the small car workshop—in theory, they will all be subject to these provisions—and I suspect that the pensions regulator, to whom falls the task of enforcement across the board, will spend a disproportionate amount of his resources on pursuing many smaller employers rather than very large companies. There will clearly be a temptation, at the very least, for smaller employers to try to persuade their employees not to become involved in personal accounts. They might offer a larger Christmas bonus or a cash payment as a quid pro quo. If one thing emerges with crystal clearness from all the seminars, conferences and research of the past two or three years, it is the depth of financial illiteracy among many people in the country when it comes to how pensions work, how much they need to contribute and how much they will receive in retirement from a particular level of contributions. There will be a real risk of that ignorance being used against their best interests, especially in the case of small employers. It is worth reminding ourselves that the target audience for personal accounts consists of people in lower-paid work, who may well be working for small companies and have no existing pension provision. When I saw the Government's original proposals—here I refer particularly to Lords amendment No. 135—I was surprised to note that they originally had no intention of providing for an offence of inducement to opt out of personal accounts. I seem to remember raising the issue at one of those seminars some time ago—they all seem to blend into one another. The Minister is fortunate to come so fresh to the issue. I raised it because it seemed odd to leave it out if we were trying to achieve an holistic approach to how personal accounts would work and how employers and employees were going to comply with them. What makes it potentially a huge issue that might strike at the very foundation of personal accounts is the issue of the interaction with means-tested benefits. We all know of the excellent work carried out by the Pensions Policy Institute some time ago that identified certain at-risk groups: people who were at significant risk of either being no better off by being auto-enrolled into personal accounts or, in some cases, being worse off as a result, including people who had started saving later, or who were renting accommodation in retirement. For us, this has always been a huge concern. At the moment, 45 per cent. or so of pensioners retire subject to means-tested benefits, and that proportion will increase inexorably over the coming years if something is not done. Take-up is a massive issue. Yesterday the Government modestly increased pension credit, but that is no help at all to the 1.8 million or so people who are entitled to pension credit but never get round to claiming it. The Treasury's fundamental assumption when pension credit was introduced was that 1.4 million people would never get round to claiming it. There is a problem here that will not go away. When we raised the issue—insistently—earlier, Ministers were dismissive about what we had to say. Their basic attitude could be summed up as, ““You're letting the side down, you're rocking the boat—the real prize in personal accounts is the millions of people who don't have any provision at the moment and will now start saving for their retirement.”” I do not disagree for a moment with that being the prize, but part of the price for that prize should not be an element of rough justice towards people in the at-risk groups who may well end up worse off because of the loss of means-tested benefits. Whoever is in power when the chickens come home to roost will certainly not want another mis-selling scandal, where a lot of people turn round to the Government of the day and say, ““Well you auto-enrolled me into personal accounts, and as a result I'm worse off.”” For the official Opposition this has always been a potential deal breaker when it came to consensus. I am delighted, of course, that, after a lot of pressure from us, Ministers finally relented. This was two or three Secretaries of State ago; they come and they go. A process was started which has been ongoing, pulling together stakeholders and looking first at trying to identify the size of the problem and then at some of the possible solutions. The Pensim 2 model in the Department is used wherever possible, although it was not until fairly recently that that even took account of housing benefit, which makes such a huge difference to many in the at-risk groups. I am pleased that Ministers finally relented and that the process has been ongoing for some time now; I think what is billed as the final seminar is taking place next week. A report of some sort will then be produced; whether it will produce any solutions is, of course, another matter. It is certainly an exercise that needs to be conducted. For us it has always been clear that if this problem cannot be addressed, there is a real danger that personal accounts simply will not work. That is a debate for another day, but once we have the data and the conclusions of that exercise, what are the options in terms of trying to address the matter and reduce or eliminate the numbers of people in the at-risk groups? Why does it matter so much at the moment? At one point, Ministers were saying that this would not be a problem until 2020 or even later, when people would start to realise that personal accounts had not been a great thing into which to be auto-enrolled. I disagreed with that; I still do. In the run-up to 2012, if that is the start date of personal accounts, people will be writing stories in the press—particularly the financial press—about people who are worse of as a result of being auto-enrolled. Indeed, some have already been writing such stories. If those stories are written, the unscrupulous employer will use them to help to persuade employees in small firms, in particular, that they do not need to be involved with personal accounts. We know that there is a huge element of irrationality about people's approaches to pension provision—an unwillingness to engage with the real issues and what the best solution is for them in the long run. We could end up with the nightmare scenario whereby the wrong people allow themselves to be auto-enrolled and end up worse off or no better off as a result, and the wrong people are persuaded to opt out when it would be very much in their interests to join, particularly relatively young people in the work force. This is why the issue of inducement to opt out has always been, for us, very important. I have no quibble at all with this and related amendments; it is excellent that the matter has been addressed. There will now be an offence of inducement to opt out, which I imagine will be used sparingly by the regulator, but it is there, and it should be publicised as widely as possible. We are very supportive of the measure, and indeed of all the other improvements to the Bill, many of them to the credit of the Conservative Opposition in the House of Lords. Without further ado, I register our broad support for this group of amendments.