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Pensions (Extension of Automatic Enrolment) (No. 2) Bill

Volume 730: debated on Friday 24 March 2023

Bill, not amended in the Public Bill Committee, considered.

Third Reading

The Bill before us today provides the legislative powers to implement the 2017 automatic enrolment review recommendations to extend automatic enrolment to young adults aged 18 to 21, by introducing powers to lower the age criteria for enrolment and remove the lower earnings limit, which would improve saving levels among low and moderate earners. Taken together, these changes would help improve financial resilience for retirement among young people, women and lower earners. Extending the eligibility age to 18 will support younger workers and provide them with the opportunity to begin saving from the start of their working lives for a more secure retirement.

Removing the lower earnings limit will proportionately benefit the lowest earners the most. Research from Onward shows that roughly 25% of people from Stoke-on-Trent North, Kidsgrove and Talke are not yet auto-enrolled into pension schemes. The Bill tackles that, creating more stability in the long term. For the first time, everyone will get an employer contribution from the very first pound of their earnings if they are enrolled or opt in. That will help to improve the incentive to save, especially for women and those individuals working part time or in multiple jobs.

Automatic enrolment has been and remains a long-term project. It has been successful through the adoption of a carefully staged, systematic and evidence-based approach, which has been supported by the consensus, including cross-party support, in this place. That is the approach on which successful expansion must be based and why the Bill works in the way that it does—to require Ministers to consult before implementing these changes, for example, on the best way and the optimum timetable for doing so. That gives Parliament, employers, workers and other stakeholders a key role in determining how best to implement the expansion of workplace pensions.

People who earn £9,000 from two separate jobs, and who may be working 12 to 18 hours a week, juggling their jobs around childcare or caring responsibilities, do not currently get the benefits of auto-enrolment at all. For part-time workers, auto-enrolment stands at around 60%, compared with almost 90% of workers in full-time jobs. The Bill will see roughly an extra third of the part-time workforce auto-enrolled, which is an increase on the percentage based in Onward’s research.

Further research from Onward suggests that, when this change comes through, it will bring almost £3.5 billion to people in our area for their total life savings. This will be transformative for the lives of everyone not just across our great country but, most importantly, across Stoke-on-Trent North, Kidsgrove and Talke.

The Bill will help to put cash into communities, help people to help themselves, and provide the extra private sector money to deliver the levelling up that we so desperately need. Automatic enrolment is widely and rightly recognised as a success. It has transformed workplace pension saving for millions of workers and is enabling them to save towards greater security in retirement.

What this Bill makes certain is that, in areas such as Stoke-on-Trent North, Kidsgrove and Talke, North West Durham and Consett, where nearly one in four people are not yet auto-enrolled onto a pension scheme, people will have more financial security in the long term. It simplifies the process, and for just a few pounds a week, through the power of compound interest, people could be £30,000 better off in retirement. That is absolutely transformative, which is why the Bill is so critical.

I know that the whole House is proud to support the Bill at this current stage and is committed to this expansion of auto-enrolment to build a more inclusive and stronger savings culture for future generations.

I congratulate my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis) on securing this Bill’s passage through the House.

I wish to highlight the importance of this issue to the whole country in the long term. The UK, like most of the rest of the world, has an ageing population. In the next 25 years, the number of people older than 85 will double to 2.6 million—it is often described as the demographic time bomb. Pension saving is one way to tackle the strain that that will place on the public finances. As we know already, when people’s pensions savings are not sufficient, the Government have to step in and provide that minimum floor and safety net.

Therefore, the more that we can encourage individuals privately to save to support themselves in retirement the less the state will have to do through taxation. That is why businesses can and have embraced these changes. Although they are making a contribution in the short term to pension savings, they will see a lower tax burden placed on them as employers in the long term as we seek to meet any gap that might exist later on in people’s lives when they retire. The policy has already been a fantastic success, as my hon. Friend outlined. This change is an important step forward, which I support.

It is a real pleasure to see the Bill reach Third Reading. I am very grateful to you, Mr Deputy Speaker, and to Madam Deputy Speaker, for allowing me to speak for the fourth time today.

I pay tribute to my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis) for guiding the Bill through its legislative journey, my hon. Friend the Member for Grantham and Stamford (Gareth Davies) for raising this issue in Westminster Hall last year, and my very good and hon. Friend the Member for North West Durham (Mr Holden) for laying the groundwork for the Bill before he was elevated to high office. It is great to see him in his place today.

When auto-enrolment was introduced, as an employer I was fearful of the impact it might have on my business and fearful of the costs it would burden me with, but auto-enrolment has proved to be hugely successful, reversing the decline in workplace pension saving and ensuring that millions more people are now saving for their future. I saw at first hand the benefits the scheme has had on the lives and futures of my employees. Employees who would never have considered being part of a pension scheme were put in a position where it became a simple and easy process. For the first time, they were ensuring that they did not fall into the trap of under-saving for retirement.

We have to recognise that for those under the age of 22 the number of people enrolled in a pension is woefully low. Among those in part-time employment, although some will earn more than the current £10,000 threshold, the number of those auto-enrolled is still significantly lower than among those who are in full-time employment. The 22-year-old minimum age simply does not work. Why should someone who chooses to start working before they are 22 not be paying into a pension from that age, the same way as someone who is 22? They would have much to gain from auto-enrolment being extended to them. Moreover, we must recognise that the current system also disproportionately impacts women and those on the lowest earnings in our society, who are more likely to be in part-time work and have multiple part-time jobs, like many of my constituents in Darlington.

In 2019, I stood on a manifesto to level up communities across the United Kingdom, and the extension of auto-enrolment is a policy that has the potential to have a real positive impact on people’s futures. It would be a commitment to level up for the long-term. The Bill is levelling up in action.

Extending auto-enrolment could potentially add trillions of pounds to the nation’s pension pot. It is a chance to ensure that people are saving for their future from a young age. It allows us to ensure that the poorest in society have a more secure future and takes steps towards closing the gap between men and women’s pension savings.

Alongside this positive Bill, which builds on the success of auto-enrolment, which the Conservative Government adopted, does my hon. Friend agree that it is important we also support the Government’s initiatives to roll out pensions advice more widely, so that people have a better understanding of their own financial situation and pensions saving, particularly for men, women and younger people?

My hon. Friend makes a really important point. I know only too well, from conversations I had with family members encouraging me to take up a pension when I was in my early 20s, it seemed an awfully long way off. I can tell the House, some 30 years later, that it comes around very, very quickly. The earlier we all start saving, the better.

In conclusion, the extension of auto-enrolment would have huge benefits for many people in Darlington and right across the country. I am delighted to support the Bill and look forward to it completing its legislative journey.

It is a pleasure to speak on the Bill. I am sure the House will be relieved to know that I do not intend to speak for long, because the Bill has cross-party support. Improving pensions legislation has a long history of cross-party support, beginning with the legacy of the pensions commission, which reported 21 years ago. The Bill is a part of that ongoing legacy. Saving for our future is very important for us all. The thing that this House can do to help people save for their future is offer a consistent policy approach, and that is what the Bill does. We have made progress on auto-enrolment, but we can go further. It is a pleasure to support the Bill.

I will ask a small number of questions, which I will be grateful if the Minister could answer. The Opposition wholly supports this Bill. It would be helpful to know when in the autumn the consultation will take place. What will the Government strategy be for communicating with young people in particular? I note comments from Members about the power of good that it can do for young people. There have been few positive policy areas for young people over the past years. I would be grateful if the Minister could talk about what the Department for Work and Pensions will do in the area. Could she say what feedback it has had from employers so far, and from trade unions? What is the Department’s plan for working with both those groups and with wider civil society and business communities, to make sure that this is a success? What is the timetable for bringing this legislation into force? What can we expect from this point? If the Minister could talk us through the timetable, I would be most grateful. I wish the Department the very best in making this legislation a reality.

I begin by congratulating my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis), and my hon. Friend the Member for North West Durham (Mr Holden) before him, on successfully piloting this Bill through all its stages in this House. Their efforts will improve the retirement aspirations for millions in the UK, from young people starting work at 18 with a pension for the first time, to those already in a workplace pension who will now build pension savings from the first pound of their earnings.

I acknowledge the support of Members across the House in progressing this legislation. The shadow Minister, the hon. Member for Wirral South (Alison McGovern), is right that there has been broad consensus on workplace pensions since the pensions commission. It is a testament to the importance that we all place on delivering improved retirement outcomes for our fellow citizens.

A lot has been achieved in the last decade of the reforms, as has been mentioned numerous times. More than 10 million people have been automatically enrolled into a workplace pension. More than 2 million employers are paying into employees’ pensions for the first time. My hon. Friends the Members for Crewe and Nantwich (Dr Mullan) and for Darlington (Peter Gibson) are right that it has been embraced by employers, and we should celebrate that. An additional £33 billion in real terms was saved into workplace pensions in 2021 compared with 2012. As has been mentioned, it has been especially transformative for women, low earners and young people, who historically have been poorly served by, or excluded from, workplace pensions. The Bill sets us on a path to do more for all those groups, who will benefit from increased saving in retirement, with many gaining access for the first time to employer contributions.

In Committee I spoke about the legislative powers in the Bill, and the duty placed on Government to consult on how we make the changes through regulations—both the approach to implementation and the timetable for doing so. We will report to Parliament on the outcome of that consultation before bringing forward the necessary secondary legislation, which will also be debated in this House. I look forward to engaging with hon. Members on those details, to ensure that the expansion of automatic enrolment is done in the right way for employers, workers and taxpayers.

To answer some of the shadow Minister’s questions directly, we will work closely with employers and trade unions throughout the consultation process. I have committed previously to launching the consultation in the autumn. I am not in a position to give an exact date, but I assure the hon. Member that I will push as hard as I can to get that as early as possible. Communicating to young people is incredibly important. Once we are through the consultation stage and we have a timeline for when we can make progress, we will work up a plan, and I will return to the House on that. On a timetable for the legislation to come into force, the commitment has previously been the mid-2020s, and that is what we will continue to say. We will have more of an idea once we have done the consultation process. I hope that answers all her questions.

In conclusion, it is to the huge credit of my hon. Friend the Member for Stoke-on-Trent North that he successfully introduced the Bill on a cross-party basis and navigated its passage—[Interruption.] There is a first time for everything. I am delighted to say that the Government support the Bill and will continue to support it as it moves through Parliament. I wish it every success.

With the leave of the House, I wish quickly to place a few thank-yous on the record. First, let me thank the fantastic civil servants in the Department for Work and Pensions, many of whom are sitting in the Box today. They have been tremendously helpful to both me and my team in getting the Bill to where we are today. I thank the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Sevenoaks (Laura Trott), for her fantastic work in unblocking the blockages that had previously existed to bringing this legislation forward.

I thank the Opposition Front Benchers, including the hon. Members for Reading East (Matt Rodda) and for Wirral South (Alison McGovern), for all their support, kind words and guidance. I thank the Scottish national party spokesman, the hon. Member for Glasgow East (David Linden), who has championed this measure and is very excited by it. I also wish to thank the Association of British Insurers, the Pensions and Lifetime Savings Association and the TUC for all their fine work, as well as Onward, that fantastic think tank, for the incredible work it is doing, now led by Sebastian Payne.

I also thank my hon. Friend the Member for Castle Point (Rebecca Harris), who does not get enough praise in this House. Without her guidance and stern tongue, I might not sometimes be able to be kept in line enough to make sure that we move things smoothly along. So I am grateful to her for the advice she has provided to get us to this place. I also place on record my thanks to Baroness Altmann, who is going to be taking this Bill on in the other place and guiding it safely through to Royal Assent.

The final big shout-out needs to go to my office buddy, my hon. Friend the Member for North West Durham (Mr Holden), who did all the donkey work, the leg work, for this Bill. I have shamelessly come in and picked it up after he was sent to such high office that I see him only once a week, rather than three or four times a week. I also thank his incredible staff members, Gabriel Millard-Clothier and Robbie Lammas, as well as my own parliamentary researcher, Harry Mahoney-Roberts, and Nathan Purchase in my constituency office, who have suffered with me to get to where we are today. This is a fantastic piece of legislation and it will make a change to many lives in the future.

Question put and agreed to.

Bill accordingly read the Third time and passed.