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Automatic Enrolment (Offshore Employment) (Amendment) Order 2020 - Motion to Consider

– in the House of Lords at 12:47 pm on 19th May 2020.

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Baroness Stedman-Scott:

Moved by Baroness Stedman-Scott

That the Virtual Proceedings do consider the draft Automatic Enrolment (Offshore Employment) (Amendment) Order 2020.

The Motion was considered in a Virtual Proceeding via video call.

Photo of Baroness Stedman-Scott Baroness Stedman-Scott The Parliamentary Under-Secretary of State for Work and Pensions

My Lords, I shall speak also to the draft Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2020. I am pleased to introduce these instruments, which were laid before the House on 16 March, alongside my Written Statement of the same date setting out their purpose and effect. These instruments implement the conclusions of a 2018 statutory post-implementation review. The review concluded that automatic enrolment into workplace pensions should continue for eligible employees in the maritime industries, ensuring them access to a pension in the same way as workers in the rest of the UK economy. Subject to the approval of the House, the instruments will remove the sunset clauses contained in the original 2012 legislation so that it continues in force beyond the current expiry date of 1 July 2020. I am satisfied that the Automatic Enrolment (Offshore Employment) (Amendment) Order 2020 and the Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2020 are compatible with the European Convention on Human Rights.

Today’s debate relates to the operation of the automatic enrolment policy framework and will allow the Government to deliver on the conclusions of the 2018 post-implementation review, which recommended that seafarers and offshore workers remain within the scope of workplace pensions. As we are all too well aware, this is a difficult time for our citizens, our country and our economy. Many employers and workers face unprecedented challenges and trying their best to keep going and meet their legal obligations, including those relating to workplace pensions. The Prime Minister and the Chancellor have made clear that the Government will do whatever it takes to support workers and businesses as they deal with the impact of the coronavirus pandemic, and that no-one should be penalised for doing the right thing.

As part of the Coronavirus Job Retention Scheme, the Government have made available dedicated grant payments for the compulsory minimum employer automatic enrolment contributions for furloughed workers. We have prioritised this help so that businesses can better manage their fixed costs and to support the principle of saving for the future, which it is important not to lose sight of during the current crisis.

The Chancellor announced on 12 May that the scheme would be extended to the end of October. It will continue in its current form to the end of July, with changes to allow more flexibility introduced from the start of August. The Government have committed to provide more specific details on the next stage of the scheme by the end of May.

The Pensions Act 2008 and secondary legislation in 2011 brought most employers within the scope of automatic enrolment and placed duties on them with respect to qualifying workers in their employ. At that time, the Government decided to delay the extension of these duties to the maritime industries to allow time for resolution of complex issues relating to the operation of international maritime law and custom, as these impacted how the workplace pension reforms would apply to seafarers and offshore workers.

In 2012, following additional public consultation on the specific impacts of the policy on these industries, the Government introduced regulations and an Order in Council to extend automatic enrolment to all qualifying maritime workers. This legislation included a statutory requirement for a post-implementation review, as well as the inclusion of sunset clauses in the instrument, taking effect on 1 July 2020.

The post-implementation review was carried out in 2018. Based on the available evidence, the Minister for Pensions and Financial Inclusion concluded that automatic enrolment should continue to apply to all qualifying workers in this industry sector. This followed on from our automatic enrolment review in 2017, Maintaining the Momentum, which had confirmed that workplace pensions should be available to all eligible workers, regardless of who their employer is or the sector in which they work.

Looking specifically at the maritime industries, I should make clear that “seafarers” refers to people working on board ships or hovercraft. This does not include share fishermen as they are self-employed and, like all self-employed people, out of the scope of automatic enrolment because they do not have an employer. Offshore workers are, broadly speaking, those working on oil or gas rigs in the North Sea.

I have considered the need to include a review clause in the instruments before the House today. The success of automatic enrolment is based on pension saving being the default option for working people across all sectors of the UK economy. A new review requirement applying to only the maritime industries would be counter to the policy objectives of these reforms and would create uncertainty for employers in those sectors and their workers. I have therefore not included one. The Department for Work and Pensions will of course continue to work closely with employers, workers’ representatives and the pensions industry to keep the policy under regular review, as we do with all our policy initiatives.

I conclude by reiterating the crucial importance of these workplace pension reforms, which are helping millions of employees in the UK to save for their retirement. This includes an estimated additional 26,000 seafarers and offshore workers saving into a workplace pension in 2019 as a result of automatic enrolment. I commend these instruments to the House and I beg to move.

Photo of Baroness Drake Baroness Drake Labour 12:54 pm, 19th May 2020

My Lords, I welcome the order and regulations, which will ensure that eligible seafarers and offshore workers continue to benefit from employer duties to auto-enrol workers into a workplace pension.

Importantly, they confirm a set of three underpinning government decisions. First, the consideration of complexities in a sector or net burden on business, which led to the original sunset clauses, has not been allowed to exclude these workers from auto-enrolment. Secondly, the Government have resisted amending the eligibility test for auto-enrolling these workers, therefore ensuring that the coverage is not diminished. Thirdly, the DWP has held to its 2017 Maintaining the Momentum report, in which it concluded that employer auto-enrolment duties should continue regardless of industry sector and size of employer.

The necessity of emergency and extraordinary financial measures in response to this pandemic can sometimes mask the risk that fundamentals around long-term sustainability get lost, which is why I welcome that the Government have maintained employer auto-enrolment duties and that the job retention scheme allows grants to cover employer statutory minimum pension contributions for millions of furloughed workers. These grants particularly benefit women and young workers, who are much more likely to be working in sectors with the highest incidence of furloughed workers.

It took 16 years to build consensus and fully implement auto-enrolment. Auto-enrolment was born in the last financial crisis with the 2008 Act. If siren voices had prevailed then and the policy had been kicked into the long grass, we would not have secured 10 million more saving and 1.6 million employers participating. It is important that auto-enrolment is maintained during this pandemic crisis, avoiding irrecoverable long-term negative consequences, particularly for younger generations who are already likely to be hit particularly hard by this pandemic.

In conclusion, I ask the Minister for reassurance that the Government are committed to maintaining auto-enrolment duties in the rebuilding of the economy, regardless of the industry sector and size of the employer.

Photo of Baroness Burt of Solihull Baroness Burt of Solihull Liberal Democrat 12:57 pm, 19th May 2020

My Lords, both these instruments refer to offshore and maritime workers who, because of their special work circumstances, have never fallen conveniently into any standard worker treatment regarding almost any working conditions you can think of. Indeed, the uncertainties and unusual working hours for these individuals have caused employers as well as government a problem in trying to squeeze them into legislation that would be appropriate for most other categories of worker.

As the Minister said, included in this group are offshore workers, such as those working on oil rigs, and seafarers, from people managing ocean liners to those on container ships. This variety of work types and circumstances has made the very issue of automatic enrolment for pensions a case in point, and the legislation embodied in the Pensions Act 2008 was no exception. As the Minister said, these workers were finally covered from 2012 following consideration of a series of complex issues relating to how the changes would fit in with international maritime law. However, the concept of “ordinarily working” in terms of periods of employment has been reasonably successful in ensuring that offshore and maritime workers are covered.

Today we discuss the renewal of this legislation, which is due to expire in the sunset clause on 1 July 2020. I would be intrigued to learn why the sunset clause was originally built in, since presumably automatic enrolment must be a good thing for all workers, even hitherto relatively prosperous oil-rig workers who have enjoyed better working conditions than many. I anticipate that it would be particularly appropriate in the case of the challenging circumstances of most seafarers, who may well endure a patchy working life, with long periods away from home potentially interspersed with periods of unemployment. I am sure that it would be particularly difficult in these uncertain Covid times for individuals to save regularly and build up their pension pot.

In the first two weeks of lockdown, 40% of North Sea oil workers lost their jobs. Supply ship workers have been hailed as heroes, keeping our supply lines going, while cruise ships are largely stuck off coastlines, unable to sail and their crew stuck on board. I ask the Minister if the challenges of having 150,000 workers in need of a crew change—who are waiting to leave or join ships—have been resolved as far as the UK is concerned. I gather that unions and employers have given the Government one month to facilitate these crew changes, but clearly the delays are taking their toll. Tragically, suicides have been reported as individuals suffer mentally, trapped on board and trying to get home, but unable to because of the lack of organised transport.

On the subject of Covid, on 14 May the Chamber of Shipping asked the Government whether the shipping and offshore industry would be exempted from the reported 14-day quarantine period for travellers entering the UK. Could the Minister please give us an update on that?

I for one am very glad that calls from employers, in the 2018 post-implementation review, potentially to relax some of the regulatory burden have not been heeded by the Government. The Explanatory Notes refer to potential “industry-specific carve-outs”, which could result from a relaxation of the compliance regime. Surely the overriding consideration is that individuals in those somewhat precarious industries are properly protected.

I wish to ask the Minister a couple of questions on paragraph 12 of the Explanatory Memorandum for both statutory instruments, which deals with the impact of the legislation. The total equivalent annual net direct cost to business is reported as only £22 million, and the total annual net benefit to all individuals is—

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Baroness in Waiting (HM Household) (Whip)

I remind the noble Baroness that we have a three-minute time limit.

Photo of Baroness Burt of Solihull Baroness Burt of Solihull Liberal Democrat

I was not aware of that, and I do apologise.

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Baroness in Waiting (HM Household) (Whip)

I am sorry, but we are very tight on time. Thank you.

Photo of Baroness Burt of Solihull Baroness Burt of Solihull Liberal Democrat

Understood. I shall draw my comments to a close.

I welcome the legislation: it seems a pragmatic way to protect the interests of workers who have very varied working lives and experience but all need security in their eventual retirement.

Photo of Baroness Anelay of St Johns Baroness Anelay of St Johns Chair, International Relations and Defence Committee, Chair, International Relations and Defence Committee 1:03 pm, 19th May 2020

My Lords, when auto-enrolment was introduced by legislation in 2008, and subsequently amended in 2012 to include seafarers and offshore workers—albeit subject to a sunset provision—I was Chief Whip and very much aware of the long route that we travelled towards achieving cross-party support for all the provisions to improve pension saving in the UK by encouraging people to contribute towards a pension. As ever, however, there was of course careful scrutiny of the Bill and the subsequent regulations throughout, particularly by the noble Baroness, Lady Drake, and the noble Lord, Lord McKenzie, both of whom are speaking in today’s debate.

I welcome the orders before the virtual House today. I notice that my screen has gone blank, but I am hoping that others can view what is going on.

I have a couple of questions for clarification of the proposals. At paragraphs 10.2 and 10.4, the Explanatory Memorandum refers to concerns raised by stakeholders about the drafting of the “ordinarily working” test, and states that they wanted it to be made more specific for seafarers and offshore workers. What definition was proposed by those stakeholders, and why did the Government decide that it would weaken the compliance regime and undermine the policy intention?

The total net equivalent annual direct cost to business is estimated at £22 million. Paragraph 12.1 of the memorandum makes it clear that part of that financial impact falls upon employers in the charity and voluntary sector. I appreciate what the Minister has already said about the assistance given to employers during the pandemic, but clearly at some stage that assistance will come to an end and there will be a financial impact on charities and the voluntary sector. I therefore ask: which employers of eligible seafarers and offshore workers fall within the category of being charities and voluntary bodies? For example, are we talking about organisations such as the RNLI, Mercy Ships or perhaps Greenpeace?

I recognise, as others have, that the impact of Covid-19 on the economy may cause employees to question the value of long-term savings and perhaps to be more prepared to opt out of pension schemes, having been auto-enrolled. I hope, however, that all employees will recognise the long-term benefits of pension savings.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Labour 1:05 pm, 19th May 2020

My Lords, I too speak in favour of seafarers and offshore workers continuing to be subject to automatic enrolment if they are ordinarily working within the UK, and I support the removal of the sunset provisions that would negate this outcome. The point was raised about why the sunset provisions were there in the first place. If memory serves, it was because some of the complexities of the arrangement were still to be tackled and it was a way of enabling legislation to go forward without losing that issue.

Our position is consistent with our calling for the expansion of automatic enrolment to workers who are not ordinarily or currently covered, and aligns with the Government’s position, as we have heard from the Minister, that all sectors should be covered.

The July 2017 consultation concerning seafarers and offshore workers estimated that the number of workers on the UK continental shelf working in the UK was a little shy of 29,000, with a dropout rate of 10%. I am afraid I missed some of the Minister’s introduction but I think she suggested that the figure was now 26,000; in any event, perhaps she could confirm that. What is the split between seafarers and offshore workers? How does the eligibility for auto-enrolment align with income tax criteria? Are they the same?

We know that since the start of auto-enrolment in 2012 more than 10 million workers have been enrolled in a pension scheme but the work has not been completed, as we know. The Motion today is a missed opportunity to extend auto-enrolment to younger workers, those on lower earnings, the self-employed and those with multiple jobs; to help the gender balance; and to extend economic justice to many of those who have proved to be our front-line saviours these past weeks.

The Government’s commitment to tackling such issues by the mid-2020s will doubtless need some sort of review, given the coronavirus and changes in working patterns and practices, though it is perhaps too soon to make a call on that. What is the position of those who have been furloughed? There was the 3% top-up but can we know whether, and how many, workers would have opted out from those arrangements? The pandemic has highlighted just how—

Photo of Baroness Scott of Bybrook Baroness Scott of Bybrook Baroness in Waiting (HM Household) (Whip)

My Lords, I am sorry but we have a three-minute time limit on this.

Photo of Lord McKenzie of Luton Lord McKenzie of Luton Labour

Understood—my apologies. I will leave it there.

Photo of Baroness Northover Baroness Northover Liberal Democrat Lords Spokesperson (Foreign and Commonwealth Affairs) 1:10 pm, 19th May 2020

My Lords, I thank the noble Baroness for introducing the statutory instrument, and her officials, who have laid out the Explanatory Notes and impact assessment so clearly. These address those who are working beyond our shores, whether as seafarers or as offshore workers, but who are normally considered as UK workers. I understand that an assessment of how the provision fitted with international sea law and with foreign-registered ships had to be carried out originally, but I am glad that these issues were resolved. Examining this reminded me of coalition days, when some of our coalition partners believed that there should be a bonfire of regulations, and that only one should be approved if two were thrown out. It was of course right to assess them, but the proposed bonfire almost resulted in the removal of flame retardant from children’s nightwear. My memory is that sunset clauses were put in to reassure those who wanted that bonfire, so that these issues could be considered again.

We usually argue for sunset clauses where there is a major intrusion of the state into people’s lives. This type of regulation is the opposite. I am glad that we seem to be in a different age now, one where the Chancellor speaks of putting the state’s arms around individuals in our current crisis. These statutory instruments are about helping to protect people. Young people think they will never get old. That is why it was very welcome when the Pensions Commission recommended that there should be automatic enrolment into workplace pensions, as people were not planning adequately for retirement. Those in zero-hours contracts still do not have these sorts of protection, and we see now how vulnerable they can be.

Clearly, those in maritime employment and offshore workers need this protection as much as others. Are other groups still outside the automatic enrolment arrangements and, if so, why? The noble Baroness mentioned North Sea workers. Would offshore workers such as those working for BP offshore in Angola and other places around the world also qualify? I think so. She is absolutely right to say that automatic enrolment should be the default position, but I also note with some concern that automatic enrolment itself will be kept under review. That should send a chill through people. As the economic crisis develops, we cannot allow a policy that has brought much benefit to be quietly set aside. I hope the noble Baroness, whose heart is absolutely in the right place, can reassure us on that. I welcome these regulations.

Photo of Baroness Altmann Baroness Altmann Conservative 1:13 pm, 19th May 2020

I thank my noble friend for laying these statutory instruments, and for her excellent introduction. I also congratulate the Government on protecting the principle of auto-enrolment, which has been so successful in bringing millions more people into the policy of pension saving and provision for retirement. This principle has been preserved for all sectors by extending the application of auto-enrolment to this group of maritime and seafaring workers.

I also congratulate the Government on protecting the principle of automatic enrolment during the furlough scheme. This principle is so important and, by deciding that automatic enrolment—at least at the minimum statutory level—will be protected through the current crisis in the furlough scheme, the Government have shown an excellent example of considering the longer term amid a short-term emergency.

We have the lowest state pension in the developed world. That makes supplementary saving essential, and the principle of extra private provision, supported by employers and taxpayers, is an important one throughout our society. I congratulate the noble Baroness, Lady Drake, and other noble Lords on all the work that they have done over the years to introduce and protect this policy.

Perhaps I may raise one issue that my noble friend is aware I have particular concerns about. It is the position of low-paid workers who are being automatically enrolled into net pay pension schemes through their workplace. They do not get the tax relief that they would in an alternative scheme, and therefore they are paying an extra 25% for their pension. As the Institute for Fiscal Studies has pointed out, these workers clearly are those who are most in need of every extra penny that they can earn. I know that this net pay policy is one that I know my noble friend the Minister and the department have been looking at, and I urge the Government to take seriously the proposals to address this issue.

I fully support these statutory instruments and I congratulate the Government and my noble friend. I look forward to continuing the successful policy of auto-enrolment into the future.

Photo of Lord Blunkett Lord Blunkett Labour 1:16 pm, 19th May 2020

My Lords, as my Braille watch does not have the facility of timing my speech down to the half minute, I shall be as brief as possible. I welcome these instruments, not least for the signal they send in terms of the continuing commitment to auto-enrolment. My noble friend Lady Drake may not remember that, along with John Hills and the chair of the commission, Adair Turner, back in 2005 she presented the initial findings, and my job was to persuade Tony Blair and Gordon Brown that auto-enrolment was the kind of long-term policy that gives Government a good name rather than a bad one. I was particularly pleased that, after the passage of the 2008 Act, although it took an extremely long time, the coalition Government were then able to pick this up and continue with it. That is why it is important to pick up on the points made by the noble Baroness, Lady Anelay, who ingeniously managed to bring in the important issue of people working in the voluntary, not-for-profit and charitable sectors that will apply more broadly in terms of the impact of Covid-19 on a much wider group of sectors than the ones we are dealing with today. I want also to reinforce the point made by the noble Baroness, Lady Altmann—I seem to be supporting Conservative and well as Labour Peers today—about the anomalies that exist.

However, my main point is in the years ahead, while we protect the state pensions of people who are unemployed and moving in and out of work, it is clear that auto-enrolment will be a crucial part of maintaining income for the future, and therefore we need to find ingenious ways of ensuring that that entitlement will continue, as very large numbers of people move from furlough into unemployment, perhaps on a long-term basis.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade) 1:18 pm, 19th May 2020

At the moment, there is unprecedented pressure on North Sea workers off the coast of Scotland, north of the border, where I am speaking from at the moment. The workers there are involved mainly in supply chains, both offshore in maritime transport and both onshore and offshore in maritime engineering. The profile of employment there is far from the stereotype of the wealthy oil baron.

In a little more than two months, global oil demand has fallen by 30% and the Brent price has collapsed by almost 70% since the start of the year. Alongside this, UK gas prices have fallen to their lowest level for 14 years and are now among their record lows. For many who thought that they would never see petrol selling for less than £1 a litre again, this is a respite, but, as a result of the economic crash, new activity in the North Sea basin has stalled, investment plans have been postponed and major planned shutdowns delayed. Even after the lockdown eases, low commodity prices are likely to endure, slowing any recovery into 2021 and beyond. As the recent Oil & Gas UK market report shows, there is particular concern about the ability of the supply chain being able to absorb more pain. Contracts are already being deferred or cancelled, while the longer-term pipeline of work is becoming increasingly uncertain.

The collapse in investment will inevitably impact on employment and therefore have long-term consequences for the workers. There will be a knock-on effect on the long-term future of those who were not part of the automatic pension arrangements but now are. Ending that would be very consequential, so I welcome the measures introduced by the Minister.

Job cuts in the sector have already been announced and the industry will see many more in the coming months. Oil & Gas UK’s current estimate is that up to 30,000 jobs could be lost over the next 12 to 18 months if action to help the sector weather this storm is not successful. For example, 60% of supply chain businesses have used the temporary furlough scheme. Only by concerted action across industry and Governments, both UK and Scottish, can we begin to mitigate such damage.

To ensure supply to the UK and a return to activity for many, a proactive testing regime for offshore workers in the sector is important. I know that the priority is the NHS, care homes and young people in schools, but north and south of the border, it is important that we get the offshore industry back to a degree of normality. Giving the lower-paid workers there security and support in the long term is important. I welcome the move introduced by the Government and hope that it will be part of a long-term consideration for a strategy to support offshore and onshore workers, in the north-east of Scotland in particular, to get the economy there back up and running.

Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth Conservative 1:21 pm, 19th May 2020

My Lords, I thank the Minister very much for introducing these instruments, which I, like others, strongly support. I also welcome the government help that has been provided in relation to furloughed employees, as announced by the Chancellor, Rishi Sunak. It is a great help at this time.

The instruments refer to “seafarers”. There is more than a whiff of Joseph Conrad about that. Although it is a rather old-fashioned term, this industry is vital for our country, as others have noted. “Offshore workers” perhaps has a more contemporary feel, but, like other noble Lords, I welcome the fact that the term extends to these categories.

The Minister noted how many people are within scope of the instruments: some 26,000, I think. How many workers in toto will be subject to automatic enrolment pensions after the instruments are passed? Other noble Lords, notably the noble Lord, Lord Blunkett, have noted that the instruments are extremely important to our society—indeed, more important than ever, not less so. I hope that any review of these automatically enrolled pensions will be about extending the pensions to other categories or to people who are not subject to them at the moment, rather than about contracting the scheme at a time when, as we all know, there is a surge of public spending—rightly so—which will continue. We know that that will put pressure on the state pension, so supplementary saving for workplace pensions should be very much encouraged.

Can the Minister say something about fiscal relief? I realise that she will not be able to say too much as this is not within the scope of her brief, but my noble friend Lady Altmann’s point about tax relief for low-paid workers who are not drawing this relief at the moment was extremely well made. They should receive this, as others do. It makes automatically enrolled pensions that much more attractive.

In short, as other noble Lords have done, I welcome the instruments wholeheartedly. I look forward to hearing what the Minister has to say about extending and embedding this to make sure that it is part of the pensions landscape long into the future.

Photo of Baroness Kennedy of Cradley Baroness Kennedy of Cradley Labour 1:24 pm, 19th May 2020

My Lords, I too support this order and these regulations. Automatic enrolment into workplace pensions should continue for maritime workers and seafarers. They should have the same access as other workers in the UK economy. As acknowledged by other noble Lords, including my noble friend Lord Blunkett, auto-enrolment, introduced by the last Labour Government, was a landmark achievement. The welcome continuation of the policy between Governments has meant that 10.2 million people are now saving £90 billion a year via auto-enrolment.

However, there are issues that it would be remiss not to mention in this debate: the £10,000 threshold, the starting age of 22 and the problems for the self-employed. I hope the Government will look at these issues sooner rather than later, especially the age threshold. This change, implemented earlier than the mid-2020s, will help young people to start saving as early as possible and give their pensions more time to grow.

During the Covid-19 crisis, the Pensions Regulator has relaxed the requirement for employers to consult on cutting pensions contributions in some circumstances, and the period in which schemes must report payment failures has been extended from 90 to 150 days. Has an assessment of these changes regarding the pension pots of individuals been made?

Recently, a leaked Treasury document suggested that one way to ease the debt burden accumulated due to the lockdown would be to scrap the pensions triple lock. Are the Government considering this policy change?

As we discuss the regulation for the offshore sector, as noted by the noble Lord, Lord Purvis, we need to recognise the pressure this industry is under due to coronavirus. The recent business outlook report from the UK Oil and Gas Industry Association says that up to 30,000 jobs could be lost in the next 18 months. What action are the Government planning to support offshore sector workers?

Photo of Baroness Fookes Baroness Fookes Deputy Chairman of Committees, Deputy Speaker (Lords) 1:26 pm, 19th May 2020

My Lords, I have for many years been a supporter of the Mission to Seafarers and know from the work I have seen it undertake how important it is. Very often seafarers are stranded in ports perhaps many thousands of miles from home. They may have personal difficulties of their own or may be worried about family back at home, so anything which gives some stability through this automatic enrolment in a pension scheme is very much to be desired. I imagine that the work of the Mission will now be even greater, given the virus. An earlier speaker mentioned the plight of seamen onboard ocean liners; the passengers have long since gone home, but the seamen are apparently still stranded. I sincerely hope that action will be taken swiftly to bring them home.

Noble Lords will have guessed that I am extremely pleased by this permanent arrangement for this group of workers. I have one or two questions for my noble friend. It may be that I should know the answers already, so I am probably betraying woeful ignorance. Are British seafarers working for foreign companies allowed to be enrolled in this scheme? Conversely, are foreign nationals legitimately living in the United Kingdom automatically enrolled with British employers?

This brings me to another point which does not relate much to these instruments but has always been a grievance for me over the years. It has always worried me when a particular topic which is the subject of law is spread among a number of Acts of Parliament or regulations. I notice with some concern that the two before us this afternoon are not to be consolidated. The official announcement says that this is because they are considered trivial, but that is not the point. What one really wants is an umbrella system so that it is very easy for anyone to look things up. Will my noble friend look at this again—maybe not on this occasion but at the soonest opportunity—and make sure that these matters are sensibly consolidated?

Photo of Lord Foulkes of Cumnock Lord Foulkes of Cumnock Labour 1:29 pm, 19th May 2020

My Lords, as one of the three Scottish Peers participating in this debate along with the noble Lord, Lord Purvis, with whose remarks I agree fully, and the noble Lord, Lord Blencathra—who I think was educated at Fortrose Academy and then the University of Aberdeen, so he has a great interest in the offshore oil industry—I welcome and want to concentrate on the offshore employment order. I also welcome the removal of the sunset clause and the continued cross-party co-operation on automatic enrolment, which was introduced by the Labour Government. However, as I understand it, there is an income threshold of £10,000, which would disadvantage lower-paid and part-time workers. If this is correct, can the Minister take this away and look at it again? She is usually very helpful on such matters.

Like the noble Lord, Lord Purvis, I will take this opportunity to make a few comments on the situation of the North Sea oil industry as it affects Scotland as a whole, but Aberdeen in particular. As he said, the price of a barrel of crude oil, which was once $120 then $70 as recently as January, is now half that. This threatens further job losses in the industry. As a member of the organisation Peers for the Planet, I want to see the use of carbon fuels reduced. But, equally, there needs to be a plan to provide alternative jobs in the green energy sector—in wind, in tidal and in other alternative energies—so that those who are displaced from the oil industry as it runs down can get a new job. Aberdeen, which once prospered through fish and then oil, needs another major industry to keep its prosperity.

Returning to the order, I join in the tributes to the front-line DWP staff who have worked tirelessly during this pandemic crisis. Finally, I thank the Minister for her usual courtesy, which I hope she will continue by agreeing with some of the things I have said.

Photo of Lord Wei Lord Wei Conservative 1:31 pm, 19th May 2020

My Lords, I join other speakers in this debate in congratulating the Government and the Minister on the principle of auto-enrolment. There are many speaking today who have been involved over the years in bringing this policy to fruition. I refer to my interests as entered in the register, which have historically related to this area. However, I also want to raise a bit of a dissenting voice, if I may.

There can be a danger of thinking that the job is done with auto-enrolment, and I will be interested to hear my noble friend the Minister’s perspective on this. I am very conscious that when you think you have done a great job, you tend to roll out the concept to more and more people. In many cases that is a good idea, but I recall that on many past occasions, the state of the American tax system for employees has often deterred the organisations I have worked with from doing too much with America. In an era when we are going to do more on free trade, has thought been given to whether this policy and others that could follow from it might deter overseas employers from employing British people, whether at sea or offshore, or in other ways? Has this been looked at? I sincerely hope that the Government will not apply these policies and ideas blanket-style to offshore workers who have some relationship with British companies, which may then deter trade.

I want to make a wider point beyond the policy of auto-enrolment. What are the Government doing to address the issue of people who have had multiple employers, especially given Covid? I know that this goes beyond the scope of the statutory instruments, but I would be keen to hear from the Minister what is being done to ensure that data from the different pension providers into which people have been auto-enrolled can be gathered over the course of their careers, so that they can get a decent picture of what they have saved or that has been saved automatically for them. Sometimes, people can be enrolled in this way without having an active involvement in or understanding of what they have been saving.

I would love to hear what work is being done to open up the data protocols, so that people can manage the money they have saved, get good advice and find a way to understand and go beyond the complexity often associated with saving for pensions. With the new technology, they will even be able to toggle their enrolment on and off in future, so that when we go through periods like this, in which we need people to save more cash up front, they can do so. I broadly welcome the principles but I would like to hear from the Minister what is being done to go further, instead of just resting on our laurels.

Photo of Lord Hain Lord Hain Labour 1:34 pm, 19th May 2020

My Lords, in 2007-08, as Secretary of State for Work and Pensions I introduced the original auto-enrolment legislation that made employee pensions membership virtually compulsory. At that time, many millions were staring at a pensions black hole, so I am pleased that since then over 10 million people are in auto-enrolment, as part of the three-quarters of workers now part of a workplace pension.

These statutory instruments are a welcome advance, especially for maritime workers and seafarers, but I appeal to the Minister to reconsider the issue of the 5 million self-employed, many of whom, as other noble Lords have said, are in low-paid or insecure work and have no pensions whatever. Can she explain how the Government intend to find a solution to this?

This is all against a background of defined benefit schemes—once the gold standard for occupational pension provision—closing at an alarming rate over the last decade as companies cut costs. The norm is now inadequate defined contribution schemes, which means that on current trends, and if the Government, with business, do nothing, the state will incur multibillion costs to save millions from abject destitution.

Notwithstanding auto-enrolment, the average pension pot of £50,000, which would give an annual income of just £2,500 a year, is nothing like enough to live on, even with a full state retirement pension. Experts estimate that we should each save at least 13% of our income from the age of 25. That is simply not happening, with auto-enrolment at a combined 8%.

The Government have kept kicking the can down the road on proper funding for elderly care, and we have witnessed the desperate predicaments of care homes in the Covid-19 crisis, but the same is true for decent pensions. We cannot and must not continue in this way. The blunt choice our society faces is between a future, which currently beckons, of poverty and misery in old age, or politicians today being honest about the need both to pay more into pensions and to raise extra taxation to finance decent elderly care.

Photo of Lord Flight Lord Flight Conservative 1:37 pm, 19th May 2020

My Lords, I hope we all support these proposals to maintain auto-enrolment for the 26,000 seafarers and offshore workers. Automatic enrolment has been the key success in this country in achieving the 10 million increase in pension provisioning.

There are five important recommendations outstanding to complete the auto-enrolment programme: to lower the minimum age of participation to 18; to implement the proposals to remove the lower earnings limit; to increase consumer engagement with their pension savings and developing appropriate levels of guidance and advice; to increase the auto-enrolment contribution to 12% to achieve the desired retirement income for the majority; and to ensure that any review and changes to the state pension scheme take into account the overall retirement income targets. Can the Minister give us some assurance that these measures will not get interminably delayed as a result of Covid?

Photo of Lord Blencathra Lord Blencathra Chair, Delegated Powers and Regulatory Reform Committee, Chair, Delegated Powers and Regulatory Reform Committee 1:38 pm, 19th May 2020

My Lords, I am grateful to my noble friend the Minister for setting out the rationale for these instruments, which I support. However, I rather like sunset clauses: they force Governments to come back to Parliament to justify the continuation of the legislation under review.

The impact assessment accompanying the instruments says:

UK legislation which came into force on or after April 2011 had to include a sunset clause where that legislation imposed a net burden on business or civil society organisations. The secondary legislation which extends automatic enrolment … into a workplace pension … contains such a clause which expires on 1 July 2020. Without government intervention, the AE … will fall away, contrary to the Government’s policy intention, as most recently set out in the 2017 AE Review: Maintaining the Momentum. Unless this legislation is renewed … workers commencing employment on or after 1 July 2020, or those existing workers who opted-out of being automatically enrolled into a qualifying workplace pension before this date, would not benefit from the legal obligations that apply to their employers to automatically enrol them.”

I agree entirely with the Government’s policy on this, but I understand that the Government considered two options. One was not to legislate, but that was a bizarre option and a non-starter. The second was to scrap the sunset clause for all time, as these regulations do. What was not considered, it seems, was a new time limit. I simply ask my noble friend the Minister: why not renew it for a further five or eight years and then let Parliament have another look at it then, as we are doing today? That is the only point on which I want clarification from my noble friend.

Finally, I went out on to oil rigs in my younger days, when I lived in Aberdeen, which the noble Lord, Lord Foulkes, referred to, and I can tell the noble Baroness, Lady Burt, that it is not a great working environment and that they deserve every penny. They deserved that even in the good days, as they do now in the bad days.

I apologise—I have one final point. I congratulate the noble Baroness who has intervened today to remind speakers of the time limit. I call on Lords authorities and Lords Deputy Speakers to cut off and mute all Peers who exceed their time limit by 30 seconds.

Photo of Baroness Janke Baroness Janke Liberal Democrat Spokesperson (Work and Pensions) 1:41 pm, 19th May 2020

My Lords, I thank the Minister for her introduction and welcome the continuation of seafarers and offshore workers in the automatic enrolment scheme.

As other noble Lords have said, the success of automatic enrolment to date has been very clear, with more than 10 million people brought into workplace savings since its implementation in 2012. However, for the continued success of automatic enrolment, the Government must further extend and embed the scheme, as the 2018 review report recommends. For example, the reduction of the lower age limit to 18 and the removal of the lower earnings limit would mean that people could save a further £2.6 billion annually, which shows the importance of savings in early career and their impact on the size of retirement savings.

Scrapping the lower earnings limit would also mean that pension contributions are calculated from the first pound earned, and would bring some 10 million lower earners into pension saving. Many of the workers whom we clap every Thursday would benefit from this. Some 240,000 more people would be brought into pension saving, most of them women, if the earnings threshold were aligned with the national insurance primary threshold. This would reduce the gender pensions gap, which currently means that the average pension pot for a woman aged 65 is one-fifth of a 65 year-old man’s, and women receive £29,000 less state pension than men over 20 years. That deficit is set to continue, all else being equal, closing by only 3% by 2060. We know that large numbers of our women key workers will suffer from pension poverty unless something is done about this.

Will the Government commit to a timetable for implementation of policy to provide certainty to savers, employers and the pension sector? In addition, are the Government considering introducing auto-enrolment for the self-employed, many of whom have no pension savings and whose savings will have been particularly affected by the Covid-19 crisis? Since 2001, the proportion of self-employed in the workforce has increased. At the same time, the number of self-employed people who actively contribute to a pension has decreased steadily since the late 2000s, from 27% in 2008-09, to 15% in 2017-18. Can the Minister give some assurances about this? I fully support these orders.

Photo of Baroness Sherlock Baroness Sherlock Shadow Spokesperson (Work and Pensions), Opposition Senior Whip (Lords) 1:44 pm, 19th May 2020

My Lords, I thank the Minister for introducing these orders, and thank all noble Lords who have spoken.

I was delighted to hear the noble Baroness, Lady Anelay, mention the Mercy Ships, and the noble Baroness, Lady Fookes, talk about the important work of the Mission to Seafarers. Indeed, it has been a nice joint meeting of two clubs: those with an interest in maritime and offshore matters and those of us who dabble in and around the world of pensions. Let us come together again at some point and have another conversation.

I am also grateful for a history lesson from my noble friends Lord Blunkett, Lord McKenzie and Lord Hain, who gave us their insights into the history of this policy. As always, I am grateful to my noble friend Lady Drake for her clear analysis and for her original work on the Pensions Commission, which was so crucial.

It is clear that this crisis will have significant implications for pensions and future generations of pensioners. Pension funds face huge challenges. Today’s statistics on unemployment and benefit claims show the scale of the crisis facing today’s workers, many of whom are struggling today, even before saving for tomorrow. A report by the Resolution Foundation, as well as highlighting the lost generation of young workers, painted a challenging picture for a cohort of workers in their early 60s. I am with my noble friend Lady Drake, and other noble Lords. It is vital that Ministers do not weaken their commitment to auto-enrolment during this pandemic and that there is a focus on rebuilding pensions in the Government’s economic plan.

As my noble friend Lady Kennedy of Cradley said, auto-enrolment was a landmark achievement of the Labour Government. Although we legislated for it, the continuity of policy that has brought us to this point is welcome. Labour has consistently supported action to ensure that the coverage of the scheme is as wide as possible, so the Minister will not be surprised to hear that we support these orders. As noble Lords have heard, these instruments confirm the decision to include seafarers and offshore workers within the scope of auto-enrolment. Unlike the noble Lord, Lord Blencathra, I am glad to see the end of the sunset provision. Would it not be strange to repeatedly review only the position of seafarers and offshore workers, while maintaining auto-enrolment for all other sectors? I am also pleased that the DWP rejected the arguments to exclude this sector altogether from the auto-enrolment provisions, and its conclusion that “ordinarily working” in the UK remains the right test for eligibility for auto-enrolment for this group, as this captures a greater number of the target population of workers. In doing so, it had to reject the case made by some employers who wanted a looser definition of which workers should be eligible for auto-enrolment. I share the view of my noble friend Lady Drake and others on the vital importance of maintaining the comprehensive reach of auto-enrolment. It is vital that we do not start creating loopholes in the regulatory framework that could be used by those seeking to evade their auto-enrolment duties.

The effectiveness of auto-enrolment in achieving its policy objective of increasing savings is also determined by the opt-out rate. Like my noble friend Lord McKenzie, I would like some clarity from the Minister on how many workers the Government expect to be affected by these orders, and what the opt-out rate for them is likely to be. The impact assessment said that the opt-out rate, which it assumed in assessing costs to be 9%, was in line with the current national average. Does the DWP not know what the opt-out rate is for these sectors? I would be interested to know.

Although these decisions affect only a particular sector, they serve to reinforce the notion that auto-enrolment should achieve a mass pension-saving system through the workplace, with duties extending to all employers with eligible workers. That was how auto-enrolment was conceived and I am glad that the Government are holding to that policy. However, too many workers are still excluded from the eligible population for auto-enrolment. With other noble Lords, I ask the Minister when the Government intend to act on those exclusions. The first of these are the low paid, as raised by my noble friend Lord Foulkes. The auto-enrolment earnings trigger excludes many low-paid workers from saving for their retirement. When will the Government lower the earnings trigger to ensure as many low-paid workers as possible, including those in the maritime industries, can benefit from auto-enrolment?

I would also be interested to hear the Minister’s response to the noble Lord, Lord Wei, who raised the issue of people with multiple jobs. I was not sure whether he was talking about people with multiple sequential jobs—in which case, I guess he was asking about the pensions dashboard—or if, interestingly, he is talking about those with multiple jobs at the same time. Can the Minister confirm that if none of those is above the threshold it means that they do not enter the scheme at all?

The second group, raised by the noble Lord, Lord Hain, and others, is the self-employed. Excluding the self-employed from the benefits of auto-enrolment means that pension saving by self-employed workers is worryingly low. The Minister mentioned that share fishermen are not included in these regulations because they are self-employed. What progress have the Government made on options to remedy this situation, to ensure that share fishermen and other self-employed workers in the maritime industries are saving for their retirement as well?

The third group is the young. The age threshold for auto-enrolment excludes workers aged under 22. When do the Government plan to lower the age threshold to ensure that younger workers are saving into their pensions as soon as they begin working?

We are facing an economic crisis on a scale not seen in my lifetime. The implications will affect the pensioners of today and for generations ahead. Noble Lords have raised a range of important questions. If the Minister cannot answer them all today, will she consider making a Statement to the House about what the Government are doing to protect the pensioners of today and the pensioners and pension funds of tomorrow? That would give all noble Lords a chance to discuss the broader issues in more detail. I look forward to the Minister’s reply.

Photo of Baroness Stedman-Scott Baroness Stedman-Scott The Parliamentary Under-Secretary of State for Work and Pensions 1:50 pm, 19th May 2020

My Lords, I thank noble Lords for their thoughtful and constructive comments, including those who issued a challenge to the Government. I remind noble Lords that in my opening speech I said that the Prime Minister and Chancellor have made clear that the Government will do whatever it takes to support workers and businesses as they deal with the impact of the coronavirus pandemic and that nobody should be penalised for doing the right thing. As the noble Baroness, Lady Sherlock, just asked, I will endeavour to answer as many points as I can. Where I cannot, I will write to all noble Lords with answers to their questions.

Let me clear up the issue of the Statement to the House. I think the best I can do for the noble Baroness on that is to go back and talk to the Minister for Pensions and the Secretary of State and come back to her.

The noble Baroness, Lady Drake, is so well respected in this field. She spoke about automatic enrolment and our commitment. We have made wage support available to assist all businesses across the regions and sectors of the economy. We believe that this is the best way to support businesses and their workers during the current crisis. The Government will continue to monitor closely the impact of workplace pensions on businesses during the current period. Our objective is to continue to support employers and to balance the needs of businesses and savers, while being mindful of wider economic factors.

The noble Lord, Lord McKenzie, and my noble friend Lord Bourne asked about numbers, as did the noble Baroness, Lady Sherlock. An estimated 29,000 workers in the maritime industries will be automatically enrolled into a workplace pension by their employer as a result of these instruments, and of them 26,000 will not opt out. This breaks down into 18,000 seafarers and 8,000 offshore workers. Across the whole economy, more than 10 million workers have been automatically enrolled into a workplace pension scheme. I will write to the noble Lord, Lord McKenzie, on the other points he raised and to my noble friend Lord Bourne on fiscal relief.

The noble Baroness, Lady Burt, asked why the sunset clause was in the legislation to start with, but the noble Lord, Lord McKenzie, answered my homework there quite well. It was done because there were still complex issues that needed to be addressed and it enabled the legislation to go forward. The noble Baroness also asked about cruise ships, as did my noble friend Lady Fookes. I will go away and get the up-to-date position and write to noble Lords with the outcome.

My noble friend Lady Anelay raised two important points. On the first, the DWP considered stakeholder proposals on the design of a specific ordinary working test for seafarers during the post-implementation review consultation. However, these proposals would have created additional administrative complexity for employers in the maritime industries. Additionally, treating workers in the maritime sector differently from other workers is contrary to the policy design of AE.

My noble friend also asked about employers that are charities and voluntary bodies. The maritime industries are a small sector compared to the overall economy and there is no direct data on the varying size and types of employers in these industries. Therefore, the DWP impact assessment for these instruments makes assumptions about the impact of workplace pension duties across different employer sizes in these industries, based on the broad level of employer contribution across the whole country.

My noble friend Lady Fookes talked about the nationality of some of the people in the maritime industry and the impact of these regulations. The nationality of the worker, and whether their employer is foreign based or owned, is not relevant; it is not an issue. On the point she made about consolidation, no change is taking place. The instrument removed the sunset clause from existing legislation, so it continues to apply. This could not be a more minimalistic approach to legislating.

At this point, I would like to pay tribute to the Seafarers charity, as other noble Lords have done, and to other charities that work in this field. They do excellent work and I place on record our thanks for this.

The noble Baroness, Lady Northover, said that we should put our arms around those who are struggling. That is absolutely what we are trying to do—and we will continue to do so. I cannot answer her question about BP in Angola, but I will write to her.

It would be career-limiting for me to tell noble Lords that nothing is going to change on automatic enrolment. I do not see it happening at the moment, but the fact is that, in these difficult days, we must tread carefully on all these big issues. But we must not lose the good work that we have done on this wonderful system.

My noble friend Lady Altmann raised the issue of women and pension schemes. The Government have taken action to protect people’s jobs and to support and pay wages. We took the decision to help ease the burden of workplace pensions for employers with furloughed staff, and this will help many women impacted by the lockdown to carry on their savings.

My noble friend Lady Altmann also raised pension relief, along with the noble Baroness, Lady Janke. Pension tax relief is a matter for the Treasury—I am not trying to duck responsibility. The Government recognise the different impacts of the two systems in pay and pension tax relief. To date, it has not been possible to identify any straightforward or proportionate means to align more closely the effects of net-pay and relief-at-source mechanisms for this population. However, as announced in our manifesto, the Government will publish a call for evidence on pension tax relief administration to see how we can fix the issue.

Turning to the noble Lord, Lord Blunkett, I think it is no bad thing to sometimes support the opposition if it means that our hearts are beating in concert to carry on with something important. He talked about finding ingenious ways to ensure that the entitlement continues: if noble Lords have ingenious ways, I hope that they will write and let me know what they are.

The noble Lord, Lord Purvis of Tweed, the noble Baroness, Lady Kennedy, and my noble friend Lord Blencathra talked about the oil industry. The noble Lord, Lord Purvis, gave an eloquent and clear overview of the challenges faced in getting the economy on the road as quickly as possible. The best thing that I can do is go back to my colleague the Minister for Employment, who is looking at this sector by sector, and perhaps fix up a meeting for the noble Lord and the Minister. I also challenge the noble Lord: if he has ideas, will he put them on paper and let us have them? We really do need this.

Reducing the trigger to include more women and low-paid workers was raised by the noble Baronesses, Lady Sherlock and Lady Kennedy, and the noble Lord, Lord Foulkes. The automatic enrolment earnings trigger determines the level of earnings at which someone must be automatically enrolled by their employer and is currently set at £10,000. This is reviewed annually, and an equality impact assessment always forms part of the review. We will continue to keep it under review as the country recovers from the impact of the coronavirus pandemic, but I will take the points made back to the department. I also want to put on record that I agree with the points made by the noble Lord, Lord Foulkes.

Regarding the triple lock, the Government are committed to ensuring that older people are able to live with the dignity and respect that they deserve, and the state pension is the foundation of that support.

The noble Lord, Lord Foulkes, again made the point about carbon fuels and alternative jobs. Obviously, this will feature in the work that we do to recover the economy. It is a tribute to those who work in that industry. We must do all we can to get the country working again as quickly as possible.

As my noble friend Lord Wei said, the job is not done. We must not take our foot off the pedal. I will take back to the department his point about people overseas being put off employing British people and will write to him. I believe that the point about multiple pensions will be sorted by the work that we are doing on the dashboard in the pensions Bill.

The noble Lord, Lord Hain, and the noble Baronesses, Lady Janke and Lady Sherlock, talked about the self-employed. We know that the current automatic enrolment framework is not suitable. That is why last summer we commenced trials working with a range of partner organisations to help inform future policy interventions. My noble friend Lord Flight raised many questions; I will answer one now and write to him on the others. The auto-enrolment review set out our ambition to remove the earnings limit and lower the age threshold in the mid-2020s. I am glad that my noble friend Lord Blencathra is pleased that we have brought the sunset clauses back to the House, but on the point about the review in five to eight years, there has never been any discussion on that, but I will find out, as requested. The noble Baroness, Lady Janke, asked about a timetable for pensions work. I will find out about this and write to her. I am sure that I have not answered all the questions, but I have done my best and will write to noble Lords.

Automatic enrolment has been transformational in getting employees into the habit of pensions saving. It has reversed the previous decline, and with over 10 million workers being enrolled into a workplace pension, automatic enrolment has by all measures been a great success. The workplace pension participation rate for eligible employees between the ages of 22 and 29 has increased from 24% in 2012 to 84% in 2018. Automatic enrolment has helped eligible women working in the private sector and raised the level of their participation from 40% in 2012 to 85% in 2018. Our ambition for automatic enrolment remains the same in relation to the 2017 review, but there is a need to reflect carefully on the current economic circumstances. It has been a huge success that we want to build on. As we have seen today, it is also important that we have the consensus to do so, so I welcome the support of noble Lords today.

As announced by the Chancellor on 12 May, the furlough and job retention scheme has been extended until the end of October. It will continue in its current form until the end of July; changes to allow more flexibility will be introduced from the start of August. This scheme is just one part of the Government’s response to coronavirus, which includes an unprecedented package for the self-employed, with loans and guarantees that have so far provided billions of pounds in support, tax deferrals and grants for businesses. The Government will continue to monitor closely the impact of workplace pensions on businesses during the current period. Our objective is to continue supporting employers and balance the needs of businesses and savers, as well as taxpayers, at this difficult time.

These instruments remove the sunset clauses from the existing legislation so that automatic enrolment into workplace pensions continues to cover eligible employees in the maritime industry, ensuring that these workers continue to have access to pension saving in the same way as the rest of the UK economy. I commend these instruments to the House. I beg to move.

Motion agreed.