These are two brief amendments that seek to clarify what is on the face of the Bill. Currently, subsection (3) deals with contributions being refunded, as does subsection (4), but it is not entirely clear that contributions are to be refunded to the job holder and the employer respectively, and that is all that the amendments seek to do. For the avoidance of doubt and possible litigation, when money is to be paid back, it is important that it is clear to whom it is going. I hope, therefore, that the two amendments will find favour with which ever Minister is to respond.
The clause ensures that jobholders automatically enrolled into work place pension savings schemes, but who decide not to save, have the right to opt out. People’s circumstances and preferences vary, and it is important that individuals remain free to decide whether private pensions saving is for them. A jobholder can opt out by giving notice in accordance with regulations to be made under subsection (2). The intention is that any contributions paid by the jobholder before their notice to opt out takes effect will be refunded to the jobholder. Similarly, any contribution paid by the employer during that opt-out period will be refunded to the employer.
The amendments would, however, make the jobholder the only possible recipient of a refund of a jobholder contribution, and the employer the only possible recipient of a refund of employer contributions. Although we can all agree with the intention, the implications up putting that in legislation for existing schemes, of which we need to take account, are immense. We cannot be certain at this stage about how the refund of contributions will operate or about the full implications for tax purposes. However, the first destination of a refund of jobholder contributions might need to be the jobholder’s employer in order to enable income tax to be deducted from earnings, which is not a pension contribution and, therefore, no longer entitled to tax relief.
By preventing the refund going the employer in the first instance, amendment No. 71 would require a scheme to know all the relevant details for all individuals, and would require those individuals, were they to receive a refund direct, to make arrangements to pay tax due on what are now earnings. With regard to employer contributions, the intention is that employers engaging with personal accounts should receive a refund of their contributions if the jobholder opts out during the opt-out period. However, amendment No. 72 would apply to all employers regardless of what scheme they use to discharge their duties. Some employers do not require refunds when a jobholder opts out. For example, some choose to leave employer contributions at the disposal of the scheme trustees when a worker opts out, either as a contribution to administrative costs, or to be used by trustees for the benefit of other members. The problem is that that is a highly technical area, and if we start making changes to current schemes, we would need to approach it with an enormous degree of caution.
Procedures for handling the return of contributions will be a matter for detailed consultation with stakeholders, including the delivery authority, as we develop the regulations. They will set out the time limits for refunds and specify how they are calculated and paid. That approach will also ensure that tax issues are fully addressed. However, I want to make it clear that whatever the regulations prescribe for the process, the refund due to the jobholder will find its way to the jobholder, and those due to the employer to the employer. We must ensure, however, that in seeking to do something that might sound simple and straightforward, we do not add a level of unintended complication and difficulty. Unintended consequences are a habit with parliamentary legislation, unless we approach with care, particularly when dealing with pensions regulation. I hope that the hon. Gentleman will consider withdrawing his amendment.
Notwithstanding the technical arguments that the Minister set out clearly for why amendments Nos. 71 and 72 should not be adopted, I am grateful to him, because he did say, at least twice, that the ultimate destination of the contributions should be the jobholder and employer respectively. I think that his words will count if there is any dispute about the ultimate destinations of those moneys. However, I take on board his points about the various interim destinations. In light of that, I beg to ask leave to withdraw the amendment.
I wish to raise a couple of points in relation to clause 7 on clause stand part. This is an important clause because the right to opt out is a critical part of ensuring that the automatic enrolment system operates properly. Making it easy for job holders to opt out is clearly important and the drafting of the clause emphasises that point. However, within the right to opt out, we find some of the issues that we will come to later in the Bill in relation to enforcement. For example, potentially unscrupulous employers—who we hope are a small minority, but they do exist—could persuade or put pressure on individuals to exercise the right to opt out.
At the moment, the drafting of subsection (7)(a) requires two things. First, that the jobholder must receive information about the consequences of opting out, and secondly that they must sign their name. In amendments Nos. 81 and 82, which are not selected but are on the amendment paper, we suggest some additional safeguards: that the jobholder would need to give notice in writing themselves, and indeed that they may also register it with the enforcement body. Those measures may go too far in terms of the burden on the jobholder, but I urge the Minister to reflect on whether the degree of engagement that the clause requires of the jobholder in the opt out process, is sufficient to ensure that it is a genuinely independent action taken by them. Furthermore—and this was the reason for suggesting a reference to the enforcement body—there could be some action that the jobholder may have to take outwith the context of their employment relationship. It would mean that they have to do something else other than, in the case of the case of the unscrupulous employer, simply sign a piece of paper that is presented to them by the employer that says “I wish to opt out”.
I am not necessarily seeking an answer from the Minister now on how he would seek to do that, but I urge him to reflect on whether the provisions in the Bill about the process that the jobholder must go through, are sufficient to ensure that the balance between making it easy for the jobholder to opt out and ensuring that they act independently, is right. I am not sure that it is right in the current drafting of the clause, but I look forward to hearing the Minister’s response.
I shall be brief. I recognise the issue raised by the hon. Member for Inverness, Nairn, Badenoch and Strathspey about employers possibly putting improper pressure on their employees to opt out. We are right to be mindful of that issue. We have tabled a new clause on that very issue so there will be a further chance to debate those points.
The point that the hon. Member for Inverness, Nairn, Badenoch and Strathspey raises is a good one. I will reflect on what he said. We are not looking to make opting out so unduly burdensome that people find it difficult to make the decision that is right for them. At the same time, we do not want employers to be putting a lot of pressure on employees to opt out.
We focused on ensuring that the employer will make sure that people are automatically enrolled and that there is no way in which the employer could prevent that. The hon. Member is suggesting that that has happened: that people are in, and now there is pressure to get them to opt out. We want to ensure that that does not happen either. One obvious way is through trade unions reporting such behaviour. There will also be considerable publicity around 2012 and thereafter so most employees will know, irrespective of whether they are members of trade unions, that they have rights to opt into a pension system.
We will also consider the forms that the employee will have to sign to opt out. We will consult on this, but that will probably be one way in which we make sure that the form makes it clear that people have a right to remain, that employers should not force people out and that people will have the protection of the law if employers seek to do so. That said, the hon. Gentleman is right that the decision to opt out must be genuinely intended. I shall reflect on his remarks and on the new clause that the Conservatives tabled to deal with the issue. We will have an opportunity later in the Bill to consider the matter further.
I should have anticipated that the hon. Member for Inverness, Nairn, Badenoch and Strathspey would want to raise matters on the stand part debate, because he had two amendments that were not selected, although they were not selected for very good reason. He was right to raise those matters in the stand part debate and I apologise for hesitating to call him when he rose.