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Automatic Enrolment: Lower Earnings Limit

Volume 656: debated on Tuesday 12 March 2019

I beg to move,

That this House has considered the lower earnings limit for automatic enrolment.

I am very grateful to have been granted time for this debate, especially during a rather chaotic week. It serves as a reminder that although all eyes are on Brexit, a number of massively important issues still need to be dealt with; that is the day job for some. One of those problems is the low earnings limit for automatic enrolment.

I want to make it clear that we support automatic enrolment. It has had a lot of positive impacts, as I am pretty sure all hon. Members agree. An estimated 10 million workers have been enrolled in workplace pensions by more than 1.4 million employers. That is an estimated £18.4 billion a year extra in workplace pensions due to auto-enrolment. Opt-out rates have been lower than expected, and participation by eligible 22 to 29-year-olds has increased. There are obvious moves in the right direction but, as with most things relating to pensions, the devil is in the detail.

The first issue is the delay in scrapping the limit. I have a problem with the lower earnings limit, and I am glad that the UK Government agreed to scrap it eventually, but I cannot understand why it is taking so long. All we have been told is that no changes will take effect until the mid-2020s. TUC research shows that a delay of six years in scrapping the limit could cut a saver’s pension pot by £12,000. That is for workers with annual earnings of £10,000, and it includes missed contributions and investment growth on funds. An employee who earns £10,000 would get more than double the amount of employer pension contributions when the limit is scrapped. The UK figures show that that would mean an extra £2.6 billion a year going into workers’ pensions, including £1 billion more from employers. If we are serious about creating a culture that recognises our ageing population and the problems relating to pensions that are on the horizon, and if we want people to save persistently throughout their lives, the low earnings limit cannot continue. It does not make sense.

The positive impacts of auto-enrolment are evidence that it is working and that things are moving in the right direction. We should be trying to include everyone in auto-enrolment. Those who are paid the least are the very people we should be looking out for the most, because they are the most likely to slip through the cracks. Their pension pot, no matter how small it is, is probably the only useful capital they have in retirement. Will the Minister give a concrete guarantee, rather than a vague timescale, about when the limit will be scrapped?

The second issue is that those on the lowest incomes are the most likely to lose out as a result of an increase to the lower earnings limit. For the lowest earners, £6,136 is a large proportion of their earnings. If employers do not include that amount in people’s earnings when calculating pension contributions, pension savings will be affected considerably. Worryingly, the changes will predominantly affect women in multiple part-time jobs, as the rise means that less of a low earner’s salary attracts pension contributions. The TUC has rightly pointed out that there is no mechanism to include those working multiple jobs with earnings below £10,000 in auto-enrolment.

The Pensions Policy Institute calculated that if income from multiple jobs was taken into account, a further 80,000 people could be saving for retirement. That breaks down to 60,000 women and 20,000 men. Once again, the Government are not responding fast enough—or, arguably, at all in some cases—to women’s concerns about their pensions. That is a theme that I have seen since I was elected.

Those concerns have been raised previously. Baroness Drake put it perfectly when she said:

“we are designing a private pension system that does not work for women who work part-time.”—[Official Report, House of Lords, 10 February 2014; Vol. 752, c. 201.]

I would argue that women do not have an adequate state pension to rely on at the moment. Ultimately, this increase is contradictory to the apparent aim of scrapping the limit altogether.

The third issue is that as the gap widens between the personal allowance and the lower earners limit, low earners are in a pension lottery through no choice of their own. The Treasury has said that the personal tax allowance will rise to £12,500. However, under the net pay method, pension contributions are deducted before tax is calculated, and savers’ tax relief is based directly on their marginal rate. That means that savers who earn less than the £12,500 tax threshold do not receive the 20% relief that they would through their employer if they were in a relief-at-source scheme. This issue affects more than 1 million people who earn more than the earnings trigger of £10,000, but less than the personal allowance of £12,500. As auto-enrolment brings in more lower-paid earners, the number caught in the net pay trap is likely to increase.

I am grateful for the fact that Her Majesty’s Revenue and Customs has said that it recognises this issue and is looking at ways to resolve it. It has said that one of the possible routes is a digital answer. I only hope that it is within closer reach than the so-called digital answer to the Irish border question. It would be helpful if the Minister could update us and say what conversations he has had with colleagues in HMRC about potential fixes.

On top of that, there are rumours that the UK Government will reduce tax relief on pension contributions in the upcoming Budget. Will the Minister give us a concrete commitment that that will not happen under this Government? Has he sought confirmation from the Chancellor that the inconsistency between the net pay schemes and other schemes will be corrected before the spring statement?

I have made these comments in this Chamber and elsewhere quite a few times. Pensions are a mess just now, and anything we can do to get more people saving has to be seen as a positive. The evidence so far suggests that auto-enrolment is a positive, so I ask the Government to stop dragging their heels and get this in motion.

I am grateful to you for calling me to speak in this important debate, Sir Gary. I congratulate the hon. Member for Paisley and Renfrewshire South (Mhairi Black) on securing it.

Since October 2012, the Government have placed new duties on employers to ensure that their workers are automatically enrolled and contributing to a workplace pension. The duties ensure access to workplace pensions for workers who were not previously in a workplace pension scheme, who earn more than £10,000 and are above 22 years old.

The automatic enrolment into workplace pension schemes has broadly been a success. Ten million workers have now been enrolled into workplace pension schemes by more than 1.4 million employers. That means that 84% of eligible employees were participating in workplace pension schemes as of 2017—a nearly 30% increase since 2012. An estimated additional £18.4 billion a year will now go into workplace pension schemes because of automatic enrolment. I am also pleased that 79% of young workers aged 22 to 29 were participating in workplace pension schemes as of 2017, alongside 84% of women. The increase in workplace pension scheme participation among private sector workers is also welcome. There has been a nearly 40% increase between 2012 and 2017.

Despite initial concerns, opt-out rates from automatic enrolment into workplace pension schemes stood at 9% in 2017. That is significantly lower than initial Department for Work and Pensions estimates of 25% and highlights that employers and workers recognise the benefits of participating in workplace pension schemes. The initial success does not mean that more progress cannot be made. An estimated 12 million people are still thought to be under-saving for their retirement. Workers who earn more than £10,000 per year are automatically enrolled but end up losing out because their contributions are calculated from the bottom of the qualifying earnings band. Non-eligible workers who earn £10,000 or less a year in each of their jobs do not qualify for automatic enrolment, even if their combined earnings exceed £10,000.

Some eligible workers who earn at or just below the lower earnings limit in each of their jobs are not necessarily entitled to an employer contribution, even if they opt into a workplace pension scheme. Those earning less than £10,000 are missing out.

Young workers—particularly those aged 18 to 21—do not benefit from automatic enrolment because the lower age limit is set at 22. Employers are not required to automatically enrol workers whose earnings are below £10,000. There are other issues around automatic enrolment of those with multiple jobs and fluctuating earnings, and of the self-employed. I can add zero-hour contracts to that, because they often mean earnings of less than £10,000.

Those issues must be addressed if we are to encourage greater participation in workplace pension schemes and greater savings for retirement. We need to look at solutions to those issues, such as lowering the age limit from 22 to 18, as well as automatically enrolling low-income workers by calculating pension contributions from the first pound earned, rather than using the current lower earnings limit.

It is vital that we get right the system of auto-enrolment of workers into workplace pension schemes in the light of the Government’s attacks on pensions over recent years. There have been increases to the state pension age; suggestions from the Chancellor that the state pension may no longer be ring-fenced from spending cuts after 2020; threats to benefits that our pensioners enjoy, such as the free TV licences for the over-75s; and the disgraceful treatment of the WASPI women, who I fully support in their fight for justice.

The policy of automatic enrolment for workplace pension schemes began under the last Labour Government, was implemented by the coalition Government and was supported by the SNP in its 2015 manifesto. We all want to ensure that workers can save for retirement, and that they have all necessary support to do so. That is why it is important not only that we commend the success of the scheme up to now, but that we make real progress on outstanding problems with automatic enrolment. I urge the Government to tackle those issues. Let us deliver for the working people on low pay in this country. Let us give them some dignity in retirement.

It is a pleasure to serve under your chairmanship, Mr Streeter. I congratulate my hon. Friend the Member for Paisley and Renfrewshire South (Mhairi Black) on securing this debate, and I thank the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney) for his contribution.

I am a firm believer in workers’ rights, but with Brexit on the horizon, it feels like even the most basic rights are no longer guaranteed or a priority. It speaks volumes that we are having this debate in this Chamber while the Brexit debate takes place in the main Chamber. It is important to recognise where the Government are taking positive action. Although it is not perfect, the attempt at auto-enrolment was one way for the Government to recognise the huge issues with the current pensions system. It has meant that eligible workers are automatically enrolled on a pension scheme, with the employer obliged to pay towards their employee’s pension.

In reality, however, it will allow pensions contributions to be paid at set limits and with set criteria, which the Government have set out in a phased timeline. The Government have made no firm commitments on when exactly the conclusion of that timeline will be, and in reality, it does not quite meet the mark of what is required for people to truly be able to plan for financial retirement.

If the Government were to scrap the lower earnings limit, as my hon. Friend outlined, that would allow pension contributions to be paid from the first pound of every worker’s salary. Currently, employers do not have to include the first £6,032 that an employee earns when calculating pension contributions, so if the Government removed the lower earnings limit, that would mean a significant increase to the employee’s pension pot.

As was outlined earlier, that would account for an extra £2.6 billion a year going into workers’ pensions, including £1 billion more from employers, according to the Government’s own figures. The Government released detailed plans to scrap the lower earnings limit in 2017, but have given only a vague commitment to take action on it in the mid-2020s. When does the Minister envisage that that will happen? 2023? 2024? 2025? 2027? Rather than the vague timescale that the Minister has set out previously, can he give a concrete guarantee about exactly when the lower earnings limit will be scrapped? To put that into perspective, research by the TUC outlines that a six-year delay could cut a saver’s pension pot by £12,000—based on the 2022 figure rather than the 2028 figure—which would make a sizeable difference to the affected individuals.

I will address some of the key flaws and primary concerns of the issue. The lower earnings limit trigger provides eligibility for the auto-enrolment programme. When it was introduced, it was set at £5,035 a year, and then increased to £7,457, which resulted in the exclusion of 600,000 workers, of whom 78% were women. After increases over the years, the earnings trigger was frozen at £10,000 in 2015-16 up to the current period of 2018-19. That resulted in the exclusion of an additional 40,000 workers, of whom 30,000 were women, notwithstanding the fact that increasing the lower earnings limit to £10,000 excluded 170,000 workers, of whom 120,000—69%—were women. I hope that that illustrates to the Minister, who I am sure already knows this, my key concerns—as spokesperson for women and equalities—about the problems this poses for women.

A whole raft of evidence, relating particularly to young or middle-aged women, shows that the Government are not hitting the mark on these matters. The WASPI women issue has run for many years and, if we consider the last economic crisis, women took the brunt of it: £14 billion was taken from women, through various tax measures, to deal with the crisis. Does the hon. Lady agree that it is about time that something was done about that?

I wholeheartedly agree. The Government have been remiss in their responsibilities to address those epidemic concerns that have increased during their stewardship in government.

I will turn to the concerns that I have outlined, including those of women, low-paid workers and the WASPI women, on whom the Government have a shambolic record. Low-paid workers, including those who have multiple jobs that do not meet that threshold, are more often than not below the earnings threshold and do not therefore meet the criteria for auto-enrolment. There is no mechanism for auto-enrolment for the self-employed.

Another group of individuals has also been completely forgotten in this programme. There is a duty to enrol for those aged between 22 and the state pension age. Those in the six-year gap between the ages of 16 and 22 will therefore be adversely impacted by that decision. The Government acknowledged that problem, but addressed it by saying that many people in that age group tend to move jobs a lot, so it is not administratively worthwhile to account for them in the programme.

What do the Government say, however, to a young person who goes into a full-time permanent job at 16? Are they not entitled to pension contributions? The UK Government have said that they will lower the age to 18 by the mid-2020s. Can the Minister tell us exactly when that will happen?

The contribution is currently set at £6,032, going up to a threshold of £46,350. That has been on a phased increase since 2012. In reality, the minimum recommendation that is currently estimated for pension savings is 15% to 18%. If the Government were to remove the lower earnings limit, it would add £2.6 billion to the annual pensions pot. That would still account for only 8% of the estimated required pension savings. That means a shortfall of 12%, on average, for each individual of working age in the UK. The Government have to address that.

The Minister himself, however, has admitted that 8% is not a sufficient contribution for a long-term retirement, and the Government’s own figures suggest that approximately 12 million people are under-saving for retirement. I hate to take words out of the Minister’s mouth, but he will probably point to the pensions dashboard to support better planning for retirement. However, for women, low-paid workers, those in multiple low-paid jobs, those aged from 16 to 22 who are in full-time permanent employment, the self-employed, and those on zero-hours contracts who fall below that threshold, can the Government say that they are serving them? For society as a whole, does the existing lower earnings limit sufficiently

“support better planning for retirement”,

to use the Government’s own words? The Government record on WASPI women alone proves that, more often than not, the evidence is that in most instances the most vulnerable in society are an afterthought.

I hesitate to interrupt the hon. Lady’s flow—but I am also allowing her to take a sip of water. Of course I will cite the pensions dashboard, which I am sure that the SNP very much support and in reality will make a significant difference, but there is also the Single Financial Guidance Body, which was set up under legislation passed last year. It is there specifically to cater for the vulnerable and to assist those who require greater ongoing access to pension advice. I hope that she will accept that such matters, passed on a cross-party basis, are evidence of ongoing assistance to people she and I genuinely care about.

I thank the Minister for that intervention. He might well remember that the SNP supported the concept of a pensions dashboard, but the Government rejected a number of key amendments in which we argued for the protection of vulnerable individuals. We are singing from the same hymn sheet about our ambitions and aims, but the fact of the matter is that the Government have the responsibility to introduce the scrapping of the lower earnings limit and the introduction of auto-enrolment pensions contributions, at the very least for those aged 18 and over, and at present they have not made a commitment to do so. He must act on his own words.

Women are often the primary parents or carers for loved ones. They are often the ones who take career breaks and part-time or flexible work to fit in with their responsibilities. They also live longer and work more hours to make ends meet. They are the most likely to be impacted by this Government’s decisions and will bear the long-term impact of the changes. Why is the Minister delaying, and to what end? Is he hoping to kick the issue further down the road so that this Government do not have to deal with it, and a future Government will, or will he give a cast-iron commitment today that he will do something to address the issue on lower earnings limits and for each of the vulnerable groups that I have mentioned?

Ultimately, ensuring that every pound earned by every worker counts towards their pension should be an ambition that we all strive for. If the estimated savings of a pension ought to be 15% to 18%, the Government’s ambition to reach 8% already falls short. The whole low-paid workforce should predominantly be recognised for their hard-earned contributions. I hope that the Government will answer the questions that my hon. Friend the Member for Paisley and Renfrewshire South and I have asked today, and that they will commit to deliver on this policy.

It is a pleasure to take part in this debate with you in the Chair, Sir Gary.

I congratulate my hon. Friend the Member for Paisley and Renfrewshire South (Mhairi Black) on securing this debate and once again leading the agenda in this place on pensions matters. Frankly, as the youngest Member of the Commons, she is an example and a role model to speak so well with authority and eruditeness on an issue that more young people should embrace and engage with. As I approach my 33rd birthday, I include myself and my peers in that youthful bracket—

We are going for consensus in this debate, Minister, so we should continue on that ground.

The SNP supports and has always supported auto-enrolment but, as my hon. Friend the Member for Paisley and Renfrewshire South highlighted, we remain critical friends. Only last month, I raised the delay in scrapping the lower earnings limit threshold when the Minister brought the relevant statutory instrument to the Floor of the House. My hon. Friend mentioned a number of benefits if only the Government would scrap the threshold, and during the SI debate the Minister said that auto-enrolment was a success story. I agree, but we could make it so much more successful if we only got on with it.

I hope that we can build on what my hon. Friend rightly said in arguing for the lower earnings limit to be scrapped and that, in summing up, the Minister will provide us with a clear and concrete timetable for the UK Government to meet and achieve their policy promise. I would also appreciate him clarifying whether implementation of the commitment to scrap the lower earnings limit will require a submission to the comprehensive spending review and, if so, is that being prepared by his Department?

I am sorry that I do not have more contributions to the debate to sum up. It is obviously an important debate and I am sorry that no one other than the Minister—I look forward to hearing from him—and his Parliamentary Private Secretary, the hon. Member for Gordon (Colin Clark), managed to drag themselves away from the unfolding Brexit mess going on in the main Chamber.

I am grateful to those who have contributed to the debate, including my constituency neighbour, the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney), for being present and for his speech. He also spoke in favour of the Government’s policy being implemented, and he rightly reiterated much of the information and statistics that my hon. Friend the Member for Paisley and Renfrewshire South provided to the House in her speech. He was also right to refer to the age restrictions; he mentioned the WASPI women, and I am sure he would agree that no one outside the WASPI campaign has done more to raise the profile of those women, argue their case, or represent them in this place than my hon. Friend.

My hon. Friend the Member for Lanark and Hamilton East (Angela Crawley) made a powerful, fact-based speech. She was right to say that the delay in implementing the policy in full is preventing people from being able to plan adequately for their future. I know that is not the Minister’s intention, but he must acknowledge that the longer that the delay is allowed to continue, the more that will be the case. She was also right to ask whether a 16-year-old working the same full-time job as a 26-year-old colleague should continue to be discriminated against by not receiving pension contributions when their colleagues do.

In conclusion, I once again congratulate my hon. Friend the Member for Paisley and Renfrewshire South. She was right to say that things are moving in the right direction and that that is what we want to see, but we want greater and swifter action. The delay, the problems with making progress on realising the pensions dashboard, the WASPI women issues, and the lack of a concrete pensions policy all highlight, in our view, the need for an independent pensions commission. In summing up, on an otherwise troubling day for the Minister and his colleagues in Government, I hope that he will bring some joy and set out a clear, concrete timetable for scrapping the lower earnings limit. I look forward to hearing from him in that regard.

It is a pleasure to serve under your chairmanship, Sir Gary.

I pay tribute to the hon. Member for Paisley and Renfrewshire South (Mhairi Black) for initiating the debate. I strongly agree with her that however central Brexit is to the future of our country, we run the risk of issues of immense importance and concern to the general public not being properly addressed here. I therefore commend her for bringing forward the debate.

The Minister will forgive me if I say what I have said on previous occasions: auto-enrolment is a testament to the previous Labour Government. I played a bit part in the process by chairing the policy commission that led to the appointment of Adair Turner. It was his genius and the team he brought together that ultimately produced the proposals for auto-enrolment. That was at a time when there were great strengths in the pensions system, such as many more defined-benefit schemes than, sadly, there are now. However, it was clear then, as it is now, that millions of people were simply not covered, or not covered adequately, by the existing pensions arrangements, so auto-enrolment was an important step in the right direction.

I welcome the fact that there has been continuity of policy. There is also cross-party consensus about the importance of auto-enrolment and of building on it at the next stages. There is no question but that a better pension landscape has been created; 10 million more workers are estimated to be newly saving, or saving more as a result of auto-enrolment into master trusts. That has led to an additional £17 billion and rising of pension savings put away, mostly by lower-income workers. We welcome the Government’s direction of travel, yet to be delivered on in practice, for those who are 18 and over; but I support the representations made that however welcome the direction of travel, it has to be acted on urgently at the next stages. I, too, look forward to the Minister’s response.

Although auto-enrolment is a landmark achievement, it is not a perfect system. Over and above the issue of the age threshold, there are other issues that crucially need addressing. First, the threshold for which workers are automatically enrolled is simply too high. In previous debates we have referred to the statistics, which speak for themselves. Department for Work and Pensions statistics show that 37% of female workers, 33% of workers with a disability and 28% of black and minority ethnic workers are not eligible for master trust saving through auto-enrolment.

Secondly, auto-enrolment does not cover the self-employed or workers in the gig economy. The Government are undertaking pilot projects, and we support that crucial initiative. Sadly, because of the nature of work as a whole, female workers, workers with disabilities, and black, Asian and minority ethnic workers are over-represented among low earners, the self-employed, those with multiple jobs and carers.

On the gig economy, we strongly believe in, have argued for and will continue to press for the redefinition of those employed as workers, to make them eligible for auto-enrolment. The problem is that self-employment and bogus self-employment are increasingly prominent in the modern economy. Figures released last year suggest that the number of self-employed workers in the UK rose by 23% between 2007 and 2017, from 3.8 million to 4.7 million. That represents a shift in the nature of the world of work and the way in which the British economy works. The self-employed represent about 15% of the workforce, and 91% of businesses say that they hire contractors. Of course, there are many people for whom self-employment is their employment of choice, and who welcome it, but too many are increasingly conscripted into self-employment against their will, with no alternative. That is why it is so important that we change the definition of employee.

To return to pensions, the latest figures from the Office for National Statistics show that only 19% of the self-employed are saving into a personal pension. The Government need to address that as a matter of urgency. The pilot projects are a step in the right direction, but the sooner they are completed and action is taken, the better. It is wrong to combine decreased security in the world of work with decreased security in retirement as a consequence of bogus self-employment.

The Minister mentioned that more workers have access to a pension pot; that is welcome, but the public’s awareness of and knowledge about their pensions need to increase at the same time. He made reference to the Single Financial Guidance Body, established as a consequence of the Act of Parliament passed last year. That was an important step in the right direction. The SFGB is rightly tasked with ensuring that more of the public are properly educated about their financial issues, including their pensions. Crucially, the new body needs to be adequately resourced, but it is a strong step in the right direction. The almost parallel move towards a pensions dashboard is welcome, but urgent action must be taken to bring it into being, although the steps thus far are welcome.

The hon. Members for Paisley and Renfrewshire South, for Lanark and Hamilton East (Angela Crawley) and for Airdrie and Shotts (Neil Gray) spoke about the lower earnings figure; we first raised that important issue in Parliament back in 2014. We proposed lowering the automatic enrolment earnings trigger to the same limit as the threshold for paying national insurance—£5,773 at the time. That would have brought 1.5 million more workers into saving for their retirement. Two thirds of the extra savers would have been women; that would have gone a long way to tackling the 37% of women who are not automatically enrolled into saving.

Not bringing lower earning workers into auto-enrolment risks leaving a ticking time bomb for the state to deal with when those workers retire. Scrapping or lowering the lower earnings limit for auto-enrolment and reducing the minimum age to 18 will introduce many more savers into auto-enrolment, and will welcome workers into saving for their pension as soon as they start work. The earnings trigger and the lower limit are crucial issues, and we hope that the Government will act on them. We look forward to the Minister’s response.

In conclusion, a number of issues have arisen from this debate. Auto-enrolment is a strong step in the right direction, but we always ought to see such steps as the first, and not the last, word.

I congratulate the hon. Member for Paisley and Renfrewshire South (Mhairi Black) on securing the debate. It is a fair and legitimate comment that some hon. Members are a little distracted by other matters taking place in the House of Commons, but I make the point that although we may have our differences on Brexit and all the difficult issues that are being debated in the main Chamber, the House is still debating and considering other matters, such as legislation on female genital mutilation, which was passed on a cross-party basis last night, and auto-enrolment, which is crucial to the long-term retirement future of all our constituents from all different backgrounds.

I genuinely welcome the debate. When I saw it on the Order Paper, I felt pleased to have the opportunity to debate auto-enrolment and to address this particular issue. The hon. Members for Paisley and Renfrewshire South and for Lanark and Hamilton East (Angela Crawley) have raised the issue in a series of parliamentary questions. I answered those questions at reasonable, but clearly not sufficient, length on 20 and 21 February, and I will attempt to address them in more detail today.

It is right to celebrate, as other hon. Members have done, the fact that in the constituency of the hon. Member for Paisley and Renfrewshire South, 6,000 men and women are benefiting from auto-enrolment. Thanks are due to the 1,130 employers that have genuinely stepped up to the plate and are in the position to make that contribution through their payroll deduction to employees up and down her constituency.

I should also say that it is a pleasure to serve under your chairmanship, Sir Gary. Given that I have a little time, I make the point that in your Devon constituency, you have 6,000 employees who are benefiting on an ongoing basis, and 1,350 very good employers that should be thanked.

It is embarrassing how often I agree with the hon. Member for Birmingham, Erdington (Jack Dromey), but he is right that this is a cross-party success story that, in my view, all political parties have got behind. I will turn to the points of the hon. Member for Paisley and Renfrewshire South in a second, but the hon. Member for Birmingham, Erdington is right to say that the process was started under a Labour Government with the Turner commission. It was then brought forward under the coalition, when my position was held by a Liberal Democrat, Steve Webb, late lamented of this House—although I think we took his seat, so he is not that lamented.

More particularly, I am the latest in a long line of pensions Ministers and Secretaries of State for Work and Pensions—including the right hon. and learned Member for Camberwell and Peckham (Ms Harman), who is married to the hon. Member for Birmingham, Erdington—who have brought forward these very positive changes. They were developed by the coalition Government, and we have expanded on them.

The key issue in relation to this is the automatic enrolment review of 2017, which, as Members can see, is not a small document. It addresses the issues and was independently commissioned by the Government. A number of experts took a great deal of evidence and addressed what should be done in considerable detail.

In answer to the questions asked by the hon. Member for Paisley and Renfrewshire South, the issue is not whether we will lower the earnings limit; we will do that. Nor is it whether we will lower the age limit from 22 to 18; we will do that. The question is when. I accept that there is a legitimate and real debate to be had in this House when legislation is brought forward as to when those changes should take place. I do not want anyone to be in any doubt: there is no question but that our policy, as set out in the 2017 review, made clear in the House previously and confirmed today, is to bring the age limit down from 22 to 18, and to bring the threshold down to the first pound earned.

I accept that there will be pressure today, as Members have made clear, to do this much sooner. I take the point that the SNP, individually as Members of Parliament and collectively through their shadow Minister, is urging the Government to act sooner. There is a serious point that the House needs to consider; we all celebrate the successes of auto-enrolment but it would be naive and wrong to say that it is an utterly done deal yet.

We accept and are grateful for the Government’s continued commitment to scrapping the lower earnings limit and reducing the age limit. We welcome that commitment today. It is not just the SNP and the official Opposition who have been putting pressure on the Minister. The Minister has put pressure on himself, because he committed that this would be done by the mid-2020s. Is that still likely? If so, my previous question stands: where is the timetable for that to be achieved?

I will give a long answer to the hon. Gentleman’s question, but I promise that I will answer it. Some 1.4 million employers have met their duties and are now offering members of staff a pension as a right. That is a significant change for those employers, and a significant burden for them. Raising the threshold, from 2% to start with, up to 5% last year and going up to 8% in April, is a significant burden. We are not talking about just the bigger employers, who can cope with it much better and have advanced payroll systems. Some of them have been paying over the odds from the word go and, to their great credit, some companies up and down the country immediately went to 5% or above. There are two key impacts that need to be assessed. We have only just got the information about the April 2018 increase and the opt-outs that took place then. The hon. Gentleman will be aware that there was just under 1% opt-out out because of the increase to 5%.

One of my main jobs in this position, which, contrary to popular belief, I actually asked to do and enjoy doing, is to take the 1.4 million employers and the 10 million employees in this country up to 8% with the minimum number of opt-outs, and the minimum impact on the economic outlook of the country. The harsh reality is that there will be a significant change to the deductions made from individuals’ pay packets, but also to the burden on businesses, whether they are large FTSE 100 businesses or coffee shops or corner shops in our local communities. Dealing with how things go this April is one of the most important, if not the most important, job I have, given the massive impact of this on all our communities. We have only just raised the threshold to 5%. We have the most important rise—a double jump—this April. It would be wrong if the Secretary the State and I, and the wider Government, talked about changing the basis for auto-enrolment before assessing how the 8% rise had gone.

This is quite a complicated process; it will genuinely take the best part of 9 months to go through all the data and get a definitive understanding of where we are on the 8%. At best, I will not know the degree of opt-outs until Christmas. It seems utterly wrong for me to seek to change the nature of the legal basis until I have a real understanding of the impact of the 8% increase.

The Minister says that we have to wait for more evidence. As I said in my speech, the DWP assumed that roughly 25% of those eligible would opt out, and the 2017 average was 9%. The Minister has talked about getting updated figures, but the participation among 22 to 29-year-olds increased from 35% in 2012 to 79% in 2017. The evidence already suggests that we are heading in the right direction and that the changes are working. Further to that, the logic of the lower earnings limit being set was that some people will not earn enough to get value for money out of their pension towards the end. Would it not be an easier answer just to pay people more, and to introduce a real living wage?

We are getting slightly off topic, but I am very happy to make the point that in 2010, when the coalition came into government, the living wage—the minimum wage as it was then—was £5.80. It is now £8.21, going up to £9, as the hon. Lady will be aware. I am happy to have a discussion about the tax threshold, which means that individual members of our communities have a huge amount more in their pockets. The tax threshold was £6,500 in 2010. It is now going up to £12,500, which will make a massive difference to the individual take-home.

All those things are good things. There is also the benefit of free childcare. We have gone from having no free childcare available whatever, up to 15 and 30 hours. It depends on how one values childcare, but taking it even on a very low basis, individual low earners would have the benefit of 30 hours a week free childcare, in those circumstances where that applies. If they have 30 hours a week childcare, that is a benefit of £150 a week minimum. I have worked it out on a £5 basis, but other statistics could give the rate.

My point is that if one looks solely at individual earnings on a long-term basis, taken in isolation that is one thing, but we also have to look at the impact of the rise in wages. It may not be as high as the hon. Lady would like, but she is making my point, so I will stop being partisan and saying, “Aren’t we doing well on the living wage, the tax threshold and childcare?” Park that for a moment. Some of those matters are burdens on individual employers.

The harsh reality is that the corner shop in the hon. Lady’s Paisley constituency, or the coffee shop—forget about the big employer—is now paying a considerably larger wage bill, because the low earners who were previously on the minimum wage are now on the living wage. The larger employers are also potentially paying the apprenticeship levy, and in April will pay up to 3% on auto-enrolment. The engagement that took place in the 2017 review indicated that time should be allowed before we reassess the way ahead. I am absolutely sure that there should be consideration of that. I accept that there is pressure on that.

I will try to address the other couple of points that the hon. Lady made, before moving on to some of the other questions. She asked about the reduction of pensions tax relief and the difference between net pay and relief at source. It is entirely right to raise those matters; she will understand that they dealt with by the Chancellor and the Treasury.

The idea that I have full control over the spring statement or the Budget, as the hon. Member for Airdrie and Shotts (Neil Gray) suggested, is something that I think we all understand is not the case. I do not have advance sight of the spring statement, but if he wishes to push for my promotion, I would be very keen for that—not that I want to be promoted, because I actually enjoy this brief.

The reality of the situation is that there is clearly a difference between relief at source and the net pay arrangement. It is acknowledged; there is no question but that something must be done on an ongoing basis. HMRC and the Treasury are aware, and there is ongoing discussion with them on that particular point.

While I am dealing with the Treasury, the question was raised about where we are in relation to long-term tax relief on pensions. Again, that is a matter for the Chancellor, but although I accept that there was some discussion about it in some comments made before the last Budget, hon. Members will be aware that there was no fundamental change to the tax relief on pensions.

I have rather disregarded my speech, but I will go back to a couple of key points. First, hon. Members will be aware that we debated this matter briefly in January, and the House debated and then agreed that the lower and upper limits of the qualifying earnings should be aligned with the national insurance earning bands in 2019-20, at £6,136 and £50,000 respectively. Not only does that provide stability and harmonisation on an ongoing basis, but we maintained the earnings trigger at £10,000, meaning a real-terms decrease due to anticipated wage growth, which brought an additional 40,000 savers into automatic enrolment, three quarters of whom were women.

I will address a couple of the other points raised. The hon. Member for Lanark and Hamilton East, whose constituency I know very well, having ridden at the Overton point-to-point far too many times—not very well; I did not win there—will be pleased to know that there are 14,000 individual employees in her constituency who benefit from the automatic enrolment. She specifically raised the issue of somebody aged between 16 and 22 who was earning but not able to get access to a pension. It is not often known—I have the great delight of telling the House this and urge the hon. Lady to tell others—that that individual aged between 16 and 22 can opt into an automatic enrolment pension with their employer. They have the ability to do that. Similar comments apply to the self-employed; they can opt in and be addressed on an ongoing basis.

The hon. Member for Airdrie and Shotts called for a pensions commission. With respect, we had that: it was called the Cridland report, an independent pensions commission to which all political parties, including the SNP, along with trade unions and the Labour party, made submissions. Whether they agreed with it or not, it was definitely the case that they made submissions.

On the self-employed, the reality is that we are continuing to expand in a great deal of detail the trials that are going on. We are considering the Taylor review, and it is my strong view that we should expand that more. I am certainly pressing to ensure that the self-employed have greater access to a pension.

I thank the Minister for enlightening me on his experiences of his jockey career in my constituency; I am sure that will be a treat for my constituents to learn. Going back for a second to the point about 16 to 22-year-olds and the opt-in, ultimately there is an emphasis on young people opting into that process and no requirement for the employer to contribute to their contributions. Does he agree that even if the Government bring forward this change for 18-year-olds and make it mandatory for employers to contribute, “mid-2020s” is a vague definition? I would be keen to hear exactly how the Minister defines “mid-2020s”, and when 18-year-olds can be guaranteed to get the same matched back from their employers.

The hon. Lady will understand that there is a big lead-in time between the passing of a parliamentary Act—this applies particularly in pensions—and when that Act kicks in. The reality is that I cannot give a definitive date today, nor do I intend to do so. I do not believe it would be appropriate to do so. I am not just giving what some would describe as a politician’s answer; I am giving my strong belief, which is that, until we have got through the 8%, we should not make a decision, because the impact on employers and employees needs to be measured on an ongoing basis. There is no dispute between us in any part of the House, I believe, that this needs to be done; the only question is when that process should take place.

I am keen to try to address the points of the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney), who has 10,000 employees in his constituency who have had the benefit of auto-enrolment. He raised individual points in relation to the state pension. I make the point that the state pension is up more than £1,000 in real terms since 2010. There is no evidence for his assertion that the state pension could not be afforded post 2020 as per the Chancellor. That is simply not the case. It is most definitely not the indication from the Chancellor, and it is definitely not Government policy whatsoever. We have committed to the triple lock.

I am conscious that I need to wrap up very shortly. The reality is that, for women, pensions enrolment has gone from 40% to 80% by reason of auto-enrolment; enrolment in the private sector has risen from just over 40% up towards 80%; 22 to 29-year-olds have dramatically improved enrolment to above 75% from a very low base; and low earners from the £10,000 to £20,000 bracket have gone from 20% enrolment up to nearly 70%.

At the same stage, we are doing things such as the pensions dashboard, on which I hope to report back to the House within a matter of weeks. We are doing the Single Financial Guidance Body, which is now up and running, with the former chair of StepChange, Sir Hector Sants, in charge. We are also pioneering things like the midlife MOT, which has a public sector angle, with what we are doing at the Department for Work and Pensions, but is also private sector-led as well, to get a greater engagement. We are also doing simpler statements for those with private sector pensions. It is my intention that all private sector businesses that provide pensions will be giving a simple two-page statement to all their customers. Whether that is done on a voluntary basis or by statute is a matter to be decided.

It is definitely the case that we are, I believe, in glorious agreement about what the position is going forward. It is not the case that there is much dispute between us. I accept that this is something that we will have to return to in the future. For the moment, I cannot give the definitive date that the hon. Member for Lanark and Hamilton East seeks, but I am very happy to continue the debate as we go forward.

Just very briefly, on the Minister’s end point there, it would be very useful if he could at least tell us whether the scrapping or lowering of the limit will be phased in, or whether it will be a blanket switch-over one night. Some detail on that would be much appreciated.

The thing that makes me quite uncomfortable in this speech and in this debate is that one of the key arguments here is that women will again bear the brunt of this. I am actually glad that we cannot get through any debate on pensions without someone mentioning WASPI, because, if anything, WASPI actually shows exactly the kind of reputation that the Government are gaining with regard to pensions. To see problems such as this being pointed out to the Government and there being no real answer as to how they are going to support women, who are yet again bearing the brunt of the worst that is happening, is quite depressing. I hope that is something that the Minister will reflect on.

I am grateful, finally, to my hon. Friend the Member for Lanark and Hamilton East (Angela Crawley) for pointing out that if people can work at the age of 16, they should be able to contribute to their own pension. I do not see why the age reduction should stop at 18. If people can start working at 16, they can start saving for a pension, especially if it is at the point where their employer does not actually have to contribute.

Again, I am grateful to everybody—all six of you—for attending the debate. This is a very important issue, and I hope that we have given the Minister food for thought.

Question put and agreed to.


That this House has considered the lower earnings limit for automatic enrolment.

Sitting adjourned.