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I have recently taken an interest in the issue of pensions in this House, but I had already had a fair amount of interest in it for a fair amount of time. Despite being a fair distance off the state pension age, or general pension age, I would quite like to have a pension, and so would most people of my age. It is really important that younger people do take an interest in this and think about it going forward. That is one of the reasons this provision is really important. We need to ensure that young people—millennials like me—will have access to decent pensions. The Government did a study that produced results in 2013 suggesting that only just over half of people who are currently of working age will have a pension that will be able to keep up their living standards. That is not an acceptable situation. I appreciate that the Government have undertaken reforms such as auto-enrolment to ensure that those numbers can be increased. We do not want everybody to be hitting state pension age and realising that in fact they cannot afford to do all the things that they intended to do. It is therefore really important to make changes to this.
In order for people to continue not to opt out of auto-enrolment and for it to continue to be as successful as it has been so far, we need to ensure that there is trust in the scheme. People must know that their money will grow at a reasonable rate and that they will get the right amount of money that they expect to get when they hit pension age. In order for that to happen, the Government need to have appropriate regulation in place, because, in the main, people are not by themselves going to read all the clauses and schedules of the regulations that come with the scheme that they are enrolled into. They need to trust that the Government have appropriately regulated these schemes so that if they fail, for example, there is security for them. Otherwise, auto-enrolment will not continue to work at the rate that it has done. It is really important that we have things like the new regulation that is coming through, and that we have recognised the rise of master trusts and how important they are for people who are involved in auto-enrolment.
I am pretty supportive of a lot of this, but I want to raise a couple of things. At the tail end of last year, I held a couple of public meetings in Aberdeen to ask people about pensions, and I was really surprised at the strength of feeling about pension regulation. I was expecting them to talk mainly about some of the well-known issues such WASPI, the frozen pension, and the lifetime ISA, which is not a scheme that I am particularly supportive of because it has far too many shortcomings. I think we are going to see a lot of negative ramifications in future with the change to pension schemes that encourages people to draw down. There is also the fact that people who enrolled in pension schemes before 1997 are not entitled to an inflationary uplift in those schemes. That was brought up a couple of weeks ago in a debate in Westminster Hall. I was also expecting the ever-increasing rise in the state pension age to come up, because I know that people are worried about that. I will not be getting my state pension until I am at least 68, under the current projection.
I was expecting all those things to come up, but in fact the biggest issue raised was the lack of appropriate regulation around some of the private pension schemes that exist. I was really surprised about that, but this is a real issue for people of all ages. People are really worried as a result of high-profile issues relating to schemes not paying out the expected amount. It is important that the Government are increasing trust in pension schemes, so that people of my age know that they will pay out.
For all of auto-enrolment’s many benefits, it has a number of shortcomings. My hon. Friend Ian Blackford mentioned how it disadvantages women, purely because they tend to be on part-time contracts. There is also an impact on people with multiple jobs, who tend to be on lower incomes; they earn a small amount in each job, so they do not get auto-enrolled. Self-employed people cannot be involved in auto-enrolment, and only 14% of self-employed people pay into a pension scheme. That is not enough. If we expect those people to be able to support themselves when they hit retirement age, more of them need to be paying into a pension scheme and the Government need to make changes to ensure that they are more likely to do so.
Age is another big issue that has not been raised today. People are not auto-enrolled until they are 22 years old, but a number of people are leaving school, starting work and hitting full-time employment earlier than that. If they are enrolled in a pension scheme when they hit 22, they will get a shock and think, “Hang on a second.” If we enrolled them earlier, I think they would be more likely to continue with the scheme. The Government need to look at that big issue.
I appreciate that the Government are continuing to make moves. This year’s Green Paper on defined-benefit schemes will be really important and the review of auto-enrolment will be fundamental. We need to look at how the scheme has worked, because it has been more successful than intended when the Government conceived it. It needs to be looked at with fresh eyes in the light of that.
At present, 24% of people have no pension scheme when they hit retirement age, but as a result of the changes that figure will be only 12% by 2050. That is much better and it shows that there have been positive developments.
My hon. Friend the Member for Ross, Skye and Lochaber and the shadow Secretary of State, Debbie Abrahams, have referred to clause 9, which provides a fall-back position in the event of a master trust failing. The issue relates to master trusts that may not be attractive enough to be taken on by other master trusts. The Government could have avoided the situation that that creates. It would have been easier for us to support the clause if, rather than saying that they will introduce the provision through secondary legislation, the Government had outlined their position and given themselves the flexibility to amend it with secondary legislation. As it stands, schemes have to have between six and 24 months’ worth of cash in the bank in order to cover themselves, but there is no clarity on how that would work and it is left to the Government to introduce secondary legislation. If the Government had provided more clarity, this would have been a better Bill and they could have amended it as circumstances changed.
I appreciate being given the opportunity to speak and I thank the Minister for taking the time to meet us last week to give us a briefing, which helped my understanding of the Bill.