Clause 11
Pensions Bill
1:30 pm
Andrew Selous (Shadow Minister, Work & Pensions; South West Bedfordshire, Conservative)
Clause 11 is very important, and sets out the band in which wages will be subject to the personal account scheme. At the moment, the vast majority of pension schemes use total basic earnings when they calculate contributions. This is not true in all cases, but certainly in the vast majority of cases. In my former life, my pension was calculated on my basic salary, rather than on any additional payments that I was fortunate enough to be paid from time to time.
I understand the concern, raised by the TUC and others, that there may be some employers—unscrupulous or otherwise—who will seek to avoid paying the correct amount into personal accounts by transferring what would ordinarily be paid as salary into commission, bonuses and overtime. I am aware of that, and I would be sympathetic to anything the Government could do to stop employers doing so, in a way tantamount to deliberate manipulation of normal commercial practice, with the aim of not paying the appropriate contributions into personal accounts. Does the Minister know of any evidence of that sort of avoidance happening now? Are employers paying remunerations that would ordinarily be part of salary or wages as commission bonuses or overtime?
How does the Government currently treat bonuses paid to civil servants and other public sector workers? The whole area of bonuses in the public sector is somewhat new to me, but one reads from time to time of significant bonuses paid to civil servants—not always civil servants who have done an amazing job. There are one or two examples of people being given bonuses when that, perhaps, was not justified, but I am sure that in the vast majority of cases it is richly justified. What happens in relation to public sector pension schemes where this is current practice?
There is a worry that clause 11, as drafted, may lead to some form of levelling down, for the following reason. The administrators of current pension schemes generally supply the information on the schemes’ members in relation to the basic salary that those individual employees receive. As I read clause 11, it looks like there is going to be an onus on the administrators of current pension schemes to get in touch with employers and find out the exact amount of commission, bonuses and overtime paid to each employee. Administrators of current pension schemes will not ordinarily have that information.
The requirements of clause 11 will place significant additional burdens on employers who have to provide the information, information that is likely to change from month to month because employees and employers cannot say in advance exactly how much overtime will be worked. Pension scheme providers do not hold that level of detail on earnings and so the employer will need to perform the check. If that results in employers getting bogged down in the monthly bureaucracy of having to provide a pension administrator with that level of detail on the overtime of every employee, which they currently do not have to do, some employers might decide that it causes too much difficulty and will perhaps level down from their current scheme.
A further complication is that administrators of current pension schemes need to know whether their scheme meets the quality requirements in clauses 18 to 24, which we will debate shortly. How will they be able to tell whether their scheme meets those quality requirements if they do not have to hand that level of detail on overtime, bonuses and commission that individual employees might be receiving month by month? It will be complicated, and it will be difficult for them to know whether existing schemes meet the quality requirements that the Government have quite properly put in the Bill. I understand exactly why commission, bonuses and overtime are included here, and I am mindful of the need to prevent employers deliberately manipulating the way in which they pay their workers to avoid contributions that they should be making—the Government would be right to ensure that those contributions were made. However, there are a number of technical and practical difficulties on which we need some assurances from the Minister. If he is not able to give full reassurance now I would be grateful if he would take the issue away to consider at greater length.