Clause 2

Pensions Bill – in a Public Bill Committee at 10:45 am on 22nd January 2008.

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Continuity of scheme membership

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

I beg to move Government amendment No. 116, in clause 2, page 2, line 4, after ‘jobholder’ insert

‘, without ceasing to be employed by the employer,’.

An employer will need to be able not only automatically to enrol people, but in certain circumstances to terminate participation in a pension scheme. The circumstances might well be involve ceasing to employ someone, so we thought that we should make it clear in the legislation that if someone is no longer employed, the obligation to continue to have them automatically enrolled in the pension scheme ceases. That was not in the original Bill, but when we considered the point we thought that we should make that explicit in case employers are in any doubt whether they are obliged to continue making contributions after an employment has ceased. The purpose of the amendment is to clarify the duty not to terminate active membership of a qualifying scheme, which does not apply when the action concerned involves the cessation of employment.

I hope that the Committee will support the amendment. It is a business-friendly amendment to ensure that current employment law and practices regarding the end of employment are not fettered by unrelated pensions obligations.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Before I call the hon. Member for South-West Bedfordshire, I would like to point out that the experiment with explanatory statements is continuing and that this is one of the Bills involved. Therefore, you will see after the amendment the explanatory statement. Personally, I hope that all members of the Committee find the explanatory statements helpful—I certainly do.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

This is a brief Government amendment, with which we agree. It is reassuring to find that the mighty Government machine with its expert advisers occasionally gets things wrong. If my hon. Friends and I were to table amendments that the Minister told us were not technically correct, we would not take that as a stunning rebuttal, given that even Ministers, with all the systems at their disposal, occasionally get things wrong.

The proposed amendment is entirely sensible and provides important clarification, as far as employers are concerned.

Amendment agreed to.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions) 11:00 am, 22nd January 2008

I beg to move amendment No. 11, in clause 2, page 2, line 4, leave out ‘, or make any omission,’.

This is a brief probing amendment to clarify exactly what sort of omission the Government are talking about in clause 2(1). It is important to provide such clarity here, given that once someone has enrolled, they remain a scheme member. It is not clear in my mind what the employer might omit that would be either a problem or an offence under subsection (1).

Photo of Danny Alexander Danny Alexander Liberal Democrat, Inverness, Nairn, Badenoch and Strathspey

This is a useful probing amendment to press a point about what sort of omissions the Government have in mind. Some omissions occur by accident and, while they will be prohibited by the phrase in the Bill, employers will want to make good their omissions straightforwardly and quickly. Equally, removing the reference to omissions, as the amendment proposes, would allow scope for unscrupulous employers to act by stealth and fail to carry out their obligations. By removing a reference to an omission, employers could fail to carry out their obligations and make it seem like an accident, which would get round some of the provisions in this Bill. That is my concern about the amendment, but I am interested to hear the Minister’s response to the points raised by the hon. Gentleman.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

What are we seeking to ensure that the employer does not omit? The sort of omission we are talking about is if an employer fails to tell the pension scheme about the up-to-date details of an employee, which might be accidental. This will be a fairly light-touch regulatory regime, so the employer could be reminded and then provide the details. If the employer wilfully defaults, however, we cannot deal with it, unless we have this wording.

The phraseology means that employers will be obliged to do what employers who enrol people in pension schemes are normally obliged to do—they are obliged to provide information not only to the employee but to the pension scheme. The employee will get the basic information that they are enrolled and with whom they are involved. They will know what their pension scheme is—whether it is a personal account or some other scheme—and the pension scheme must also be given up-to-date details on the employee, as and when the details change. That will not be onerous, and we do not intend the provision to result in employers being subject to intervention by the state. The objective is to ensure that the employee reminds the employer that there is an omission and that the employer deals with it. If not, the matter could be reported to the appropriate authorities, and the employer could be reminded again. The obligation is not meant to be unduly onerous, but it is necessary for the purposes of the Bill. There need be no fear of accidental omission, but there needs to be an obligation to ensure that there is no deliberate omission.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

That is exactly what I hoped to provoke by way of response and clarification by the Minister. I assure the hon. Member for Inverness,  Nairn, Badenoch and Strathspey that this is a probing amendment, which I do not want to press to a Division.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn

Question proposed, That the clause, as amended, stand part of the Bill.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

I would be grateful if the Minister were to tell the Committee what the Government’s intention is in relation to the “prescribed period” mentioned in subsection (3).

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

The Government’s view is that the prescribed period should be immediate: an employer should enrol an employee in a pension scheme when a period of employment starts. There are, however, exceptions if there are exempt schemes to which particular rules apply. We are anxious not to cause problems for employers who make contributions well in excess of the minimum required with automatic enrolment and who have an ongoing pension scheme that operates very well. Such employers should be able to continue with their schemes, and it may well be that in such situations it is possible to continue with the rules that operate at the moment. However, if the employer does not have a pension scheme, they will be obliged automatically to enrol employees to the minimum standard from the first day on which they are employed. That should be the way in which we proceed.

Question put and agreed to.

Clause 2, as amended, ordered to stand part of the Bill