Clause 49

Part of Pensions Bill – in a Public Bill Committee at 9:45 am on 31st January 2008.

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Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions) 9:45 am, 31st January 2008

We certainly support the Government amendment. An employer should not be able to take back from employees any money given to them to encourage, persuade or bribe them to opt out of auto-enrolment. The measure is a sensible addition to clause 49.

I want to debate further with the Minister the question of employers offering financial inducements to their employees to opt out of auto-enrolment. It seems that as far as some employers are concerned—hopefully a small minority—there will be a clear financial incentive to pay money to employees so that they do not automatically enrol, given that the employers would save the 3 per cent. that would otherwise be added to their payroll costs year on year. They might say to an employee, “Here’s £100,”—or £500 or £1,000, who knows what the figure might be?—“this isn’t a good deal for you and there’s a lot of administration for me; it’s a silly Government scheme. Why don’t you take the money now? You’ll be better off and it will save me the hassle.” Under clause 49, such an agreement would not stand, because the employee would be able to keep the money and then chose to enrol in the scheme automatically. The TUC representative who gave us evidence was pleased about that and said that there might be some smart employees who would take the money and automatically enrol—one could not blame them.

On a serious point, my genuine worry—I am surprised that it is not shared by the Minister or, indeed, all members of the Committee—is that there will be some employees, who perhaps do not pay great attention to our proceedings or watch the news that carefully, who  will take what is effectively a bribe from their employer to stay out of the scheme without realising that they have lost out on what could be an important and meaningful pension provision. Given that the Minister wants to discourage employers from doing that, I am surprised that he does not want to make it an offence for an employer to do something that is against the intention of all three parties represented on the Committee. If such action were an offence, that would be a further deterrent to employers and would, therefore, be a small but useful contribution to the Committee’s objectives.

Will the Minister elaborate on what exactly will happen, in terms of missed contributions, when such a deal between and employer and an employee is uncovered? In particular, will there be an onus on the employer to make good on the contributions that should have been paid? We have had a useful debate on the role of the Pensions Regulator. The TUC’s briefing asked whether the Pensions Regulator will look out for employers who have atypically high numbers of staff who have opted out. Will it be part of the regulator’s role to survey employers and spot unusual patterns of opt-outs that suggest that such financial inducement or bribes might be involved? Such inducements would be in the employers’ financial interest but not, in the vast majority of cases, in the interest of the employees, although that is not to say anything against the debate that we will have shortly on means-testing. New clause 1 would provide an extra deterrent to stop employers from doing something that we all agree is wrong. I will be interested to hear the Minister’s response.