Thank you, Sir Nicholas. It falls to me to welcome you back to the Chair. We are now in the more familiar proceedings of detailed debate in Standing Committee, although I would like to say that I found the evidence sessions useful. They added in many important ways to the debate and they will help us to scrutinise the Bill more effectively over the next couple of weeks.
The amendment is by nature a probing one. I do not intend to press it to a vote but it would be worthwhile for the Committee to examine it. Personal accounts are to be prohibited for everyone over the age of 75. There is the option for people to join a personal account between the state retirement age and the age of 75, which is absolutely right. That is their choice. If people want to go on contributing to a personal account between the age of 60 or 65—it will soon be 68—and the age of 75 that is absolutely right. Why, however, is there this blanket cut-off at the age of 75?
It could be that some people have not thought much about pensions or savings until quite late in their working lives. Maybe they are from a gene stock that is likely to give them a long working life. One example is the late Bill Deedes who died last year at the age of 94. He was working until only two weeks before he died. What if Mr. Deedes or others like him had not thought about pensions until their late 50s or early 60s? If he had reckoned that he was likely to live a long time why should he have been forbidden from contributing to a personal account, say between the ages of 75 and 77, or between 75 and 80? Had he done that he would have had 14 years in which to enjoy a pension income between the ages of 80 and 94. That would be a much longer period than many other people who retire at 65 or whatever and sadly only live for a couple of years.
I am curious, therefore, as to why there is this blanket cut-off at the age of 75. An employer such as Asda, for example, is well known for employing large numbers of older workers. B&Q also regularly employ people in their late 70s and 80s and find them extremely good and competent workers. Indeed, we have had members of this House who have been eminent members, Sir Nicholas, well over the age of 75. Who are we, therefore, to forbid contributions to personal accounts over the age of 75? It is presumptuous to have this cut-off and I am interested to hear what the Minister will say in response. This is a forewarning; there are one or two areas I would like to discuss in the clause 1 stand part debate, but they are not relevant to this amendment.
Thank you very much, Sir Nicholas. It is a pleasure for me to welcome you back to the Chair and to echo the comments made about the great value of our evidence-taking sessions, particularly on the some of the matters we will consider later on. I recognise that this is a probing amendment, but it does seem to be probing an area that is of some interest and importance, given some of the issues raised in the evidence-taking session on Thursday, relating to the way in which personal accounts will or will not work for people who start saving later in life.
The hon. Gentleman made an important point about the reason why the cut-off age of 75 has been selected. He cited some examples of Parliamentarians and others, and there are clearly more and more people now—given the quite correct and natural exhortations from the Government and all parties in the House—who want to work longer for their own good and the good of society. Though some aspects of the law such as those related to annuitisation do involve an upper limit around the age of 75, it does seem that, in circumstances where people over 75 are encouraged to continue working if they wish to—and many people of that age do wish to continue working—there should be within this Bill at least an understanding of the options for those people to continue to put money aside for their retirement. While many of us think that when we reach the age of 75, we shall want to retire, many other people—especially given that life expectancy now is in the mid-80s and may in the next few years reach the 90s—will have a number of potential years of retirement ahead of them and will want to save for them. That is the context of the question the hon. Gentleman is asking, and I look forward to the Minister’s reply.
May I, too, welcome you, Sir Nicholas, back to the Chair and to our deliberative sessions? I also found the evidence sessions very helpful and wish to extend my thanks to those who gave evidence to us. In terms of the amendment before us, the reason the age of 75 is in this particular clause is that 75 is the age at which annuitisation needs to take place, according to the tax rules. If we were to change this, we would have to look at the tax rules and that is something we would not want to do in this Bill, but in a Finance Bill.
Essentially, 75 is when pension tax relief ends, and pensioners are required at that stage to secure a pension income with savings from defined contribution schemes. So that is the reason why this Bill does particular things: it is not meant to make a significant change in tax laws.
The hon. Gentleman would not expect me to commit my colleagues in Her Majesty’s Treasury to any such consideration. All things in taxation are always under review. I am afraid that is all I can say in response.
I am not sure that we have learned a very great deal from the Minister, either in his speech or in response to my intervention. I have at least raised the general issue, perhaps for general consideration, perhaps for members of the Committee to take away and think about. Perhaps they might have a quiet word in the Corridor one night with Treasury Ministers. As people live longer they will perhaps need the extra years to provide themselves with extra provision in retirement. It was a probing amendment and I beg to ask leave to withdraw it.
The first is agency workers. I have been reading the excellent House of Commons Library brief on the subject, which makes it clear that according to case law an agency worker may be regarded as an employee of the agency for which he is working, as an employee of the client of that agency or, in some circumstances, as self-employed. That has significant implications for the administration of personal accounts. There is a good case for agency workers to be auto-enrolled as they need decent pension provision just like everyone else. However, there is a particular concern that it is the organisation responsible for the payroll administration of that employee that should have to auto-enrol and administer personal accounts. I foresee all sorts of administrative problems if that were not the case. It would be difficult for the employee, the employer and this country’s thriving agency worker sector, and we would not want to do anything to harm that sector.
I hope I am not expressing my ignorance, but the second unclear area was that of employees of British companies, or perhaps people in the armed forces, working overseas. Paragraph (a) says that a jobholder is an employee or worker
“who is working or ordinarily works in Great Britain under a contract”.
The employees of some of our multinational companies may have a home service type of employment contract but not be locally employed. Presumably they are not therefore ordinarily working in Great Britain. Does that mean that they cannot be auto-enrolled? For example, I am not sure whether the staff of HM Diplomatic Service are always paid under local conditions or whether they continue under the PAYE system and pay into their UK national insurance accounts. That aspect of the Bill is not clear either and I would be grateful if the Minister could elaborate on both those areas.
I would be grateful for the Minster’s thoughts on one further item in relation to clause 1. Subsection (2) states:
“Where a jobholder has more than one employer, or a succession of employers, this Chapter applies separately in relation to each employment.”
It must of course be right that for people with multiple jobs that reach the qualifying earnings limit each employment be treated separately, for the purposes of the Bill. I am concerned about that category of people—those in multiple employment—and I would be grateful for the Minister’s thoughts.
In my constituency, for example, there are people working in the tourism industry. Someone might have a series of seasonal jobs, such as a winter job in the skiing industry—for as long as it survives the ravages of global warming—and then several summer jobs in different tourism employments throughout the season. This clause states that the Bill applies separately to each job. If such people do not reach the qualifying earnings limits in each job, they will not be in a position to benefit from personal accounts, despite the fact that over the course of their three or four jobs they might well build up a total income of £10,000 or £12,000 a year.
The personal accounts delivery authority has pointed out that additional complexity of that sort adds to the cost and therefore reduces the overall benefit to people enrolling in personal accounts, which I understand. Can the Minister tell us how—if at all—he thinks that there is a way around that problem for those people? One suspects that the target audience will include people in multiple low-income employment who are not saving for themselves, for whom the only option is to take out a personal pension and to contribute as and when they can. It would be helpful if a way were found to enable such people to benefit from personal accounts without adding to the administrative burden. I have not tabled an amendment on that point, because I do not have a proposal. I simply want to hear the Minister’s response to the question how the Bill relates to that group of people, and this seems like an opportune moment to raise it.
I will deal with each of those points. As far as agency workers are concerned, where a person is employed is a matter of fact in law, and our view is that the primary obligation should lie with the agency. We want people to be automatically enrolled, and I think that the broad view in the Committee is that that is the right approach. Agencies often allocate staff to a number of employers over a short period of time. A catering agency, for example, might say “Go to this hotel one day, that restaurant the next day, and then another hotel.” We therefore need to ensure that the primary obligation remains with the agency.
Some agencies have an agreement with a particular employer to provide a number of staff over a prolonged period of time. For example, BMW has an engine plant in my constituency, and it gets staff through a particular agency, whom it then employs over considerable periods of time—years. The arrangement is that pensions can be paid by the direct employer, rather than by the agency, so provided that somebody is covering it, it is possible for the agency to pass the obligation down. We need to ensure that, provided that they comply with all the other rules, the person doing the work can get their pension, become automatically enrolled and have their opt-out, if they want it. Primarily, the position should be that they are in a pension scheme. The obligation will lie first of all with the agency. If there is an agreement, it can then be passed elsewhere, but the employee must be enrolled.
The point raised by the hon. Member for South-West Bedfordshire is interesting, and it is covered in case law. Lawson v. Sercoinvolved an employee of Cathay Pacific Airways, which is a company registered in Hong Kong. The claimant’s permanent home base was at Heathrow, and the question was whether or not he was based in the UK. The court’s answer was that he was, so it depends where the employee is based. Diplomats are based in their country of origin, so those who work here for a time, if this is their normal base for work purposes, are based here. If an American who works for an American company were to work in the UK for a period, and if this were their normal base for the job, then they would be subject to the legislation in the UK. Broadly, that is the way in which the legislation will work. The key issues are the claimant’s home base and the normal place that they work.
The Minister’s answer is clear, but I want to clarify one further point. In my part of the country, many agency workers work overseas—I am thinking particularly of those who work in the oil industry. Presumably, if the agency were located in the UK, those people would be automatically enrolled. Is that correct?
Yes. The agency is the home base from which the person operates. I am trying to think through some of the issues that the hon. Gentleman has raised, because, as a former Energy Minister, I know that the variations in employment patterns in the energy industry are considerable. Basically, such UK workers work for an agency. Where a UK employee works for a foreign company in a foreign country, however, they may not be covered by the UK legislation—they are not in the jurisdiction; they are not employed from here; they are not employed through an agency; and they may have enrolled abroad.
Another example involves an agency that employs people from abroad to work abroad—those people may come from one country and work in another, but the agency is based in the UK. The question is whether such people would be subject to automatic enrolment, and I want to think about that one a little.
I was not trying to catch the Minister out; the matter just seemed relevant. If he would like to write to me at some point, then that would be welcome.
I will think about my last point. I am afraid that my ability to find exceptions is a product of my previous training.
Thank you, Sir Nicholas, I am aware of that.
I will deal with the hon. Gentleman’s point about his constituents with multiple employment. That is an issue of some concern. We have worked as hard as we can to see whether we can find an easy way of resolving the issue. If a person has multiple—perhaps seasonal—jobs, each earning less than £5,035, which is the current rate, then that person will not be automatically enrolled. There will be no obligation on them to have a pension scheme, just as they have no obligation on, for example, national insurance. There are a number of exceptions in relation to the lower level of £5,035.
One of the problems that we encountered in looking to find a resolution is that so many permutations are possible—other rules also apply below that level, such as for national insurance. Our view is that it would create more complexity and difficulty if a series of new obligations were imposed, and it would provide a level of deterrence on employing people. To ensure that such seasonal jobs remain, in the end our view is that complexity and administration difficulties for employers mean that we are better off not trying to change the law. If we were to change the law, we felt that employers would not be likely to employ people for a few weeks on low-paid contracts. Employers would probably find some other way of dealing with the issue, such as offering overtime to other workers, rather than employing people for short periods. In that way, we would interfere with the labour market.
If someone has a job that brings them more than £5,035, they would be entitled to automatic enrolment with that job. They could ask their other employers to make further contributions, but such contributions would be voluntary, and they could make voluntary contributions into personal accounts. That is how we deal with that point. I do not dispute that that is not an entirely happy situation, but it is, I regret to say, about the best we can do in a difficult circumstance.
The Minister has thrown a lot of light on that area. His comment about foreign workers—the example involved Americans—coming here for short periods and going back serves to underline the importance of looking at the issue of transferring out in a few years’ time, when someone is seconded to this country for, say, two years. Perhaps that American might be more interested in getting his contributions back out and putting them in his 401(k) scheme back in America, rather than leaving two years of contributions in the British personal accounts scheme.
I am also grateful for clarification on agency workers. My reading of clause 1(1)(a) is that what the Minister has outlined is not what is down in the Bill. Perhaps other parts of the Bill mean that it will be all right for an agency worker who is working overseas to contribute to personal accounts, if the agency is based in the UK. I hope that a legal challenge cannot be mounted on subsection (1)(a).
I am also grateful to the hon. Member for Inverness, Nairn, Badenoch and Strathspey for his points on workers having more than one job, and we will undoubtedly come back to that issue in other parts of the Bill. The Minister was reasonable in his response, and I am aware of the point that he was making.