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Pensions Bill [HL]

I thank the noble Baroness for her intervention. Regrettably, she catches me at a time when I am not able to go as far as the Daily Mail, for instance, in saying what may happen as a result of discussions—which are entirely amicable—between the DWP and the Treasury in developing these proposals. Therefore, I cannot deal with her rather pointed query. The Johnson review recommended that the personal income tax threshold of around £7,400 from this April would be the right starting point to trigger automatic enrolment. The latest announced pension and benefit rates bear this out. Persistent low earners get a higher replacement rate from the state, with means-tested benefits and the state pension, without private pension saving. This is clearly the other leg of the argument about whether it is attractive for low earners to save. From this April, the minimum annual guaranteed retirement income for a single person from the state will be around £7,140, with housing benefit on top of that. It is clear that individuals earning around this level during their working life can receive a similar income in retirement without saving. Therefore, it would be wrong to auto-enrol them. These amendments seek to introduce a lower entry point for automatic enrolment. This would mean encouraging a group to save who may receive more money in retirement from the state pension system than they earn during their working life. There is an additional advantage to a higher earnings trigger that I would bring to your Lordships’ attention, which we believe will address a concern from pension schemes and employers. One of the persistent problems with the original design of automatic enrolment was to do with very small, low-value contributions on earnings just above the automatic enrolment point. We believe that the separation of the entry point from the contributions threshold creates a buffer against such small contributions. As a bonus, but not a driver, if we can settle on rates that employers already use, it would make the operation of payroll a great deal simpler. We recognise that the increased automatic enrolment trigger has an impact on low earners at the point of automatic enrolment. However, we do not believe the effect is detrimental. The right people will be auto-enrolled and the lowest earners will not be. That is the right outcome. Critically, we have built in a safeguard. We support an individual’s decision to save where they feel that saving is right for them. Where someone below the threshold feels that they would benefit by saving, they can opt in to a workplace scheme. If they earn more than £5,715, they will get an employer contribution. We have just covered that ground. I am acutely aware of the passions that the raised threshold has aroused. I am honoured to have taken part in such a robust and challenging debate. However, the automatic enrolment earnings trigger significantly improves the operation and the targeting of automatic enrolment. The new trigger ensures that the right people are encouraged to save. These amendments would encourage saving among a group of individuals, many of whom should not be saving. Therefore, we are unable to accept them and I ask noble Lords to withdraw them.