Clause 3
Pensions Bill
4:00 pm
Andrew Selous (Shadow Minister, Work & Pensions; South West Bedfordshire, Conservative)
Being six foot five and a half, I am pleased to hear that.
The first issue that we have not so far debated is the age 22 stipulation in paragraph (1)(a). It is a slightly different state of affairs from the point I raised when I spoke to amendment No. 1 on clause 1. That was about the fact that over 75s were forbidden or unable to be part of the personal accounts scheme. Of course, because we have agreed on clause 1, people between 16 and 22 will have a right to enrol on the personal accounts scheme. However, I want to tease out the Minister’s thinking on why the core age runs purely between age 22 and the state pension age. A person could have six wasted years between ages 16 and 22, when they have started their working lives but are not in the personal accounts scheme. We are all keen to get people into the savings habit as early as possible, given the huge deficiencies in people’s pension pots that have come to light in recent years. If a young person begins their working life earning perhaps £5,035 per year, would it not be sensible to auto-enrol them? Of course, they would have the option to come out if they thought that they were going to be in a particular job for only a short period, or if they wish to study, or for whatever other reason.
I am mindful of placing too many burdens on businesses, and some young people move in and out of jobs frequently early in their careers, but that is not the case for all young people. I would welcome further elucidation from the Minister on the six-year gap between the ages of 16 and 22. My guess is that few people who are aged between 16 to 21 will actually step up to the bar and choose to be auto-enrolled, and I do not know whether the Government have any advertising planned to encourage people to volunteer, but it is an important point and I would be grateful if the Minister responded to it.
The other area that I wanted to touch on is the collection method for personal accounts. All businesses, and particularly small employers, are concerned about it. The Work and Pensions Committee dealt with the issue in March in its fifth report of the last Session. Recommendation no. 230 on page 56 of the report states:
“We would have expected the thinking on such a crucial keystone in the operation of the scheme, for employers, employees and the Authority and Board, to be more advanced at this stage, and we are deeply concerned that it is not.”
The report goes on to ask whether the PAYE scheme could not be amended to make life easier for employers. On page 55, the report states:
“Lord Turner admitted...that collections systems were ‘not an issue that we bottomed out fully’”.
Therefore, the Pensions Commission did not really begin to consider the issue, give it full scrutiny, or ask the Government to come up with proposals.
Businesses in general, as represented by the Federation of Small Businesses and Mike Cherry, are concerned about the matter. In our evidence session on 17 January, he told us that the federation is worried about the “on-cost” of creating a different system in addition to PAYE. It is not just the cost to businesses that are significant, which we all want to minimise given the extra 3 per cent. that will be added to employers’ payroll costs. There is also an issue of time.