“(1) The Treasury must calculate and publish the projected lifetime value of an individual’s pension before and after the changes made by under this Act.

(2) For the purposes of subsection (1), the projected lifetime value is the total amount of pension income an individual is expected to receive over their lifetime.

(3) The calculations made under subsection (1) must—

(a) be based on clearly stated assumptions, and

(b) include illustrative examples covering different pension entitlements.”—(Charlie Maynard.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

The Committee divided: Ayes 195, Noes 317.

Question accordingly negatived.

The Deputy Speaker resumed the Chair.

Bill reported, without amendment.

Third Reading

I beg to move, That the Bill be now read the Third time.

The Bill amends the Social Security Contributions and Benefits Act 1992, creating a power to apply employer and employee national insurance contributions on salary sacrifice pension contributions above £2,000 a year from April 2029. Reform of this type, as I have said, was inevitable. The cost to the Exchequer of salary sacrifice pension schemes was due to almost treble by 2030 without reform. The Government are taking a pragmatic and balanced approach to that reform: first, by introducing a cap so that ordinary workers are, in the vast Majority of cases, unaffected; secondly, by giving employers, employees and providers a long lead-in time, so that everybody has plenty of time to prepare; and thirdly, by ensuring that saving into a pension, including via salary sacrifice, remains hugely tax-advantageous. The Government continue to provide over £70 billion of income tax and national insurance relief on pension contributions each year. Employer pension contributions will remain the most tax-advantaged part of the system.

In this debate and others on pensions, we have heard strong cross-party consensus that greater pension adequacy is important. We all look at the forecasts for private pension income and see that they show lower private pension income on average for those retiring in 2050 relative to those retiring today. That is not an acceptable place to be. Answering that question is the job of the Pensions Commission, which we have put in place with cross-party support. It is rightly examining the question of retirement income adequacy and fairness. I gently note that those groups that we all agree are under-saving for retirement, such as low earners and the self-employed, are precluded from using salary sacrifice or are much less likely to use it than other groups.

Part of what we are doing through the Bill is delivering badly needed reforms to the tax system alongside other measures from the Budget. These measures are what it takes to keep waiting lists falling, cut borrowing and cut energy Bills in the years ahead. Those who do not wish to support changes like these cannot have it both ways and call for additional spending, additional support on energy bills and the rest.

More generally, it is important that we all consider the effectiveness of tax reliefs in the system, which cost a cumulative £500 billion a year. If we defend the status quo, even in the face of tax reliefs, which are hard to justify and whose costs are rising significantly, that means that higher taxes for everybody else. We are not prepared to see that happen.

Indeed, I am sure that in their hearts the Opposition parties also believe that these reforms are necessary. As a test of that, I invite the Shadow Minister to stand up and commit to reversing the changes if—though it is very unlikely—the Conservatives ever happen to form a Government again. I am 100% sure that he will not do that, because he knows that these changes need to be made. On the basis of what should be cross-party support, I commend the Bill to the House.

I call the Shadow Minister.

The Pensions Minister is absolutely right that there is an awful lot that we agree on. It is always a great pleasure to spar with him and agree on certain things, but this Bill is not one of them. Let me be clear why we disagree with the Minister.

First, the contributors to the research done by His Majesty’s Revenue and Customs were absolutely against this Bill. The report, which was published last year and which the Minister mentioned on Second Reading, concluded that all the hypothetical scenarios explored in the research, including the £2,000 cap, were viewed negatively. It also pointed out that the £2,000 cap was the most complicated option presented. Given that the Government tabled no amendments to address the genuine concerns of savers and industry, it seems that the Minister is still apparently chuffed that he is implementing a policy that is, at best, the least worst option for everybody who was asked to comment.

Secondly, the Government are voting for a Bill that will add to the administrative burden on businesses. The pensions system is already incredibly complex for experts to navigate, let alone the general public. That is why salary sacrifice arrangements have been such a popular savings tool for both employees and employers. The principles are easy to understand, with the only real piece of admin being on the employer to ensure that the employee does not fall below the national living wage. But what are the Government doing? They are going for the option that the report considered to be the most complicated.

The Government are choosing to confuse with complications a system that is currently the simplest to deliver. The changes will add an estimated £30 million each year in administrative costs to employers—and this comes at a time when businesses and the wider economy already pay an estimated £15.4 billion just to comply with the tax system. What about the effects on businesses, which see a 15% employer national insurance bonus through helping people to save? The changes will mean that employers will be hit with a 15% increase on the costs of employment.

The savings that employers achieve through salary sacrifice arrangements are often invested back into their employees and their businesses, including through increased pension contributions to all employees, higher wages, or more investment into plant and machinery for growth. That is a good thing. The Government are now taking money away from the productive part of the economy and putting it into other parts. No wonder businesses think that this is a nonsensical policy delivered by a directionless Government, who forget that businesses are the ones that create wealth in our economy, add value to it and drive growth.

Thirdly, the Government are supporting a Bill that will not actually raise the stated revenue. As my hon. Friend Richard Fuller pointed out when winding up on Second Reading, the change appears to have been timed to maximise revenue in 2029-30: the year that counts for the Chancellor’s fiscal rules. That is £4.8 billion to fill the Chancellor’s black hole—she will have one by then—in order to make a cynical attempt to stick to a fiscal rule. This is a cynical measure that destroys a lifetime of savings opportunities for just one year of revenue. Frankly, it is also likely that the Government will not raise anywhere near the £4.8 billion budgeted for, as higher earners max out the benefits of the scheme before it comes into force in 2029; and, in any event, people are figuring out a workaround.

Fourthly, the Government are voting for a Bill that harms lower earners the most. As I pointed out earlier, the Society of Pension Professionals estimates that over 850,000 basic rate taxpayers who use salary sacrifice will be affected by the changes, and those 850,000 people will be taxed at a higher rate than their wealthier colleagues—something that the Government apparently seek to target with this policy. And I always thought that Labour Governments were meant to be on the side of working people, Madam Deputy Speaker!

Fifthly, and finally, the Government are voting for a Bill that will make the impending pension adequacy crisis worse. As I said in my introduction, there is widespread agreement that people are not saving enough, so why make the second largest revenue-raising measure of last year’s Budget one that goes after people’s savings for later life? It goes against that basic, important and agreed objective of people planning for their futures. More importantly, it goes against the Government’s own financial inclusion strategy.

As the Economic Secretary to the Treasury set out in November,

“Our aim is to create a culture in which everyone is supported to build a savings habit, building their financial resilience in the long term.”

How does the Bill accomplish that reasonable ambition? It won’t, because it disincentivises employees from saving more in their pensions and it disincentivises employers from providing it as an option in the first place.

Altogether, it is the wrong policy that sends the wrong message at the wrong time. We gave the Government a chance to address some of those concerns earlier, and they did not take it. We hear all those concerns loud and clear from businesses, savers and all the rest of them, which is why we want the Government to think again on this issue and why we will vote against this Bill on Third Reading.

People are simply not saving enough for their retirement. Rather than restricting the options, we should be encouraging the creation of new incentives that encourage people to save more. Instead, the Government are pushing through a Bill that will do the opposite. It is unbelievably unpopular because it punishes 3.3 million people who actively try to save for retirement by punishing the 290,000 employers who incentivise their employees to save. Worst of all, it breaks another of Labour’s manifesto promises: that it will not increase taxes on working people. It remains the wrong policy to pursue, and that is why we will vote against it.

I call the Liberal Democrat spokesperson.

I will let it pass from here.

Question put, That the Bill be now read the Third time.

The House divided: Ayes 316, Noes 194.

Question accordingly agreed to.

Bill read the Third time and passed.