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Pensions Bill [HL]

My Lords, I strongly support my noble friend’s amendment. The Government are essentially following the proposals of the Johnson report. I see red copies of it all around the House—I am sure that noble Lords have not consulted it for the first time as we now come to debate it. Having read that report, on which, as my noble friend said, the Government are basing their proposals to lift the trigger, I was completely unpersuaded. I thought that it was thin on everything except, possibly, employer preferences, which, left to them, would have no doubt pushed the earnings threshold to £10,000 or more. I am surprised, of course, by such a conclusion. The Johnson report offers two reasons for raising the earnings trigger. The first is that such low earners are involved that even without NEST they would have a very high replacement income based on their state pensions in retirement, so they do not need an additional pension such as NEST. The second argument run by Johnson, and therefore presumably supported by the Government since it was relayed by the Minister in Committee, is that such people are so low paid that the sums they would achieve are not worth while. For example, if someone is earning £7,500 and the trigger is set at £5,700, they would bring in only about £130 a year for their pension pot. Let us look at those two arguments. My response to the first argument, about high replacement, is, frankly, ““So what?””. There is nothing to say that just because you are poor in your working life, you would break some golden Treasury rule by being at least as well off if not better off in retirement. It is simply an irrelevant argument. I shall make two points in response to the second argument about the small size of the pot. First, as the Johnson report acknowledges and as the Minister has rightly told us, many women will go on to higher-paid jobs, and even small sums started early enough will be valuable and increase persistency of saving and the savings habit. If someone has not enrolled, it will be that much harder for them to do so later on when a pay rise seems to be eaten up by auto-enrolment, and it will not happen. From my quick calculations over the weekend, even if there was only the very modest figure of £130 a year in real terms going into a pension pot, I estimate that over 30 years that would none the less allow a woman to build up a pot of £8,000 to £10,000. Given a decent state pension, it obviously would not be sensible to annuitise that pot, since it would be below the trivial commutation limit, but it would mean that she would go into retirement with a modest but useful capital sum, perhaps for the first time ever. After all—and this is the question that I would like the Minister to address—that was exactly the previous Government’s argument, which I think the current Government have also run. We encouraged people to defer taking their state pension by one or possibly two years and, with the money saved from that deferment, provided a capital sum of £10,000 to £15,000 as a pension pot, which we further privileged by ring-fencing it and protecting it from pension credit. I stand to be corrected, but I take it that this is continuing and that the Government have not scrapped it. In other words, a few years back the consensus around the House was that we thought it important to encourage people, mostly men, to build a modest capital sum for retirement by not drawing down their state pension at the age of 65 but deferring it for one or two years. Indeed, we so much wanted this to happen that we ring-fenced those savings by not allowing them to count against pension credit taper. When it comes to NEST and women, however, we do not seem to think that the same argument runs. I disagree with that. The one argument that was not run by Johnson, but might have been valid, was the means-tested trap. But even that depended on a woman’s household income and on whether she was partnered. Given the single state pension in prospect—alleluia—that problem evaporates. We are allowing women to do this voluntarily, but as my noble friend Lady Drake said so rightly, these are precisely the women for whom voluntary enrolment is least likely to happen, is the least suitable, and for whom auto-enrolment is appropriate. I would ask the Minister to remind us why it is acceptable to encourage men to build a small capital sum by delaying taking their state pension for a year or so, even protecting it against pension credit, but when it comes to NEST and where a woman might have a similar small capital sum, apparently it is not so desirable, even though her finances may be infinitely more strained. I hope that the Government will reconsider this. The Johnson arguments are simply invalid. They may give the Government a hook to hang on, but they do not run. The Government seem to be signing up to the notion that if you are poor in your working life, it is morally acceptable to be poor in retirement. I do not accept that and neither should the Government. If they are saying that the capital sum is not worth having, since we do not allow that argument to run on the state pension, we should not allow it on NEST. On both of those grounds, I hope that the Minister will offer his favourable support to my noble friend’s amendment.