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Pensions Bill [HL]

My Lords, I shall also speak to Amendment 43. Concerns about levelling down have been raised throughout the development of the auto-enrolment proposals. In an attempt to predict the likely occurrence of this, a range of interested parties, including the DWP, have carried out surveys. The Johnson report summarises its view on the position on page 63. It says that, "““taken as a whole, the bulk of evidence suggests only limited reductions in pension contributions as a result of the reforms. Surveys by Fidelity, Capita Hartshead and the CBI consistently report that around seven in ten employers are not planning to revise or reduce their current levels of provision, and the National Association of Pension Funds found only three per cent of employers planning to reduce contributions for existing members””." The thrust of this is to be broadly welcomed, but we accept that differing definitions of qualifying earnings and perhaps more traditional definitions of pensionable pay can add to uncertainty, although I believe that the previous Government made it clear that it was the quantum of contributions rather than the basis of calculation that was important. This issue prompted the search for a process of certification that allows an employer to certify overall that schemes satisfy the relevant quality criteria for defined contribution schemes. That in theory avoids the necessity of demonstrating in respect of each employee by detailed calculation that the minimum contribution on the basis of qualifying earnings as defined in the Bill has been met. That is easier said than done. I recall a number of meetings with stakeholders trying to unlock this conundrum of wanting to encourage employers to stay with existing but quality schemes on the one hand but being reassured that auto-enrolment worked for all, especially those who had been shut out of pension savings in the past. Clause 10 introduces an alternative requirement to the quality requirement set down in existing legislation that will enable a scheme to be used for auto-enrolment. It is to this that Amendments 42 and 43 relate. The Bill states: "““In prescribing an alternative requirement … the Secretary of State must be satisfied that, in all or most cases, a scheme will be able to satisfy the requirement only if … for a majority of individual relevant jobholders, and … all relevant jobholders taken together””," the relevant quality requirements in respect of employer and total contributions are met. Our amendment would require the Secretary of State to be satisfied in respect of all cases and for more than a majority of individual relevant jobholders. We have defined this as 95 per cent or all routinely. My first question to the Minister is why the Secretary of State cannot seek to be satisfied in respect of all cases for which an alternative requirement is prescribed. What are the sort of exceptions considered desirable or acceptable, and why? My second question relates to new subsection (2A). The alternative requirement needs to ensure that for all jobholders or a cohort—the relevant jobholders—sufficient employer and overall contributions are paid to satisfy the relevant quality requirement. However, it also requires this to be the case for individual relevant jobholders, but only for a majority of them—50 per cent plus one. Clearly, this could lead to significant numbers of individuals missing out. The aggregate requirement could be met by more generous contributions for some jobholders with less than qualifying amounts for others. The Delegated Powers and Regulatory Reform Committee refers to this as a significant power, as, indeed, it is. We are obviously aware of the proposed certification model on which the DWP is working. The Minister may want to update us on progress. The proposal is based on employee’s pensionable pay from pound one and has three steps: a 9 per cent minimum for each jobholder; an 8 per cent minimum for each jobholder where pensionable pay in aggregate equals at least 85 per cent of total pay; and 7 per cent for each jobholder where 100 per cent of pay is pensionable. It is understood that this may give some 92 per cent coverage, but the Minister might like to explain precisely what this coverage is. What analysis has been undertaken of the 8 per cent who presumably would not, on an individual basis, have a minimum contribution paid on their behalf? However, our focus is not only on how this particular scheme would work; it is crucially on the powers that it is proposed to enshrine in primary legislation. Should a Secretary of State be so minded—I certainly do not contend that this is the case at present—an alternative requirement could allow nearly half of all jobholders to be short-changed. This is simply not acceptable to us and we urge the Minister most strongly to look at these powers again. I beg to move.