Clause 4 - Automatic re-enrolment where employer interrupts scheme membership

Pensions Bill [Lords] – in a Public Bill Committee at 10:30 am on 12 July 2011.

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Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions 10:30, 12 July 2011

I beg to move amendment 1, in clause 4, page 4, line 9, leave out ‘within the prescribed period’ and insert

‘with effect from—

(a) the day after the cessation referred to in paragraph (a) or (b) of subsection (1), or

(b) a day within the prescribed period (if a period is prescribed)’.

Photo of Graham Brady Graham Brady Chair, Conservative Party 1922 Committee

With this it will be convenient to discuss Government amendments 2, 3, 4, 5, 6, 7, 8

Photo of Steve Webb Steve Webb The Minister of State, Department for Work and Pensions

Good morning, Mr Brady. We now move on to the part of the Bill that deals with automatic enrolment into workplace pensions. I must say that one of the proudest achievements of the coalition Government is that 2012 will actually happen next year. There has been much speculation that there will be delay and that things might not happen at all, but we were determined to press ahead with auto-enrolment and in the words of the report, which will become our gospel for the morning, “We were determined to make auto-enrolment work”. Ring-bound copies of the report are in the room for hon. Members, who have not yet had the chance to study it in detail. The purpose of the clauses that we shall be dealing with today is to get the nitty-gritty of auto-enrolment right and to refine the detail, but to stick to the principle that has all-party support that, if we want to do something about pension saving and workplace pension saving, overcoming the inertia of choosing a pension, making sure that we have an employer contribution, automatically enrolling people and leaving them free to opt out is a better way to do so.

Clause 4 deals with a technical problem under the Pensions Act 2008 that brought in auto-enrolment, while Government amendments 1 to 5 to clause 4 and Government amendments 6 to 8 that relate to other clauses will tidy up some of the detail. I wrote to all members of the Committee as well as to you, Mr Brady, on 30 June with details of what the technical amendments will do but, for the record, I shall just sum that up. To explain Governments amendments 1 to 8, I shall have to explain the purpose of the clause so I shall deal with that all in one go and not return to the clause itself.

Clause 4 covers the situation when someone has been auto-enrolled into a workplace pension and then the person’s membership of a qualifying scheme ceases. For example, if the employer cuts their contributions below the minimum level, that scheme would cease to count for auto-enrolment purposes. The question is then what would happen to the employee, and we are keen to make sure that there is no discontinuity in their membership of a qualifying scheme so the Bill places a duty on firms to make sure that people stay in a scheme. As currently worded, before we drafted clause 4, there was a danger that, unless people actively consented to going back into a scheme, it would not happen. Indeed, the effect of the law as previously drafted was to make employers non-compliant whatever they did and, on balance, we consider that that is not a good place for the law to be.

The clause is designed to overcome such a position and to make sure that people are re-enrolled with immediate effect if they cease to be members of the qualifying scheme. The clause, as amended by amendments 1 to 8, will also cover a range of subsidiary issues. For example, someone under the qualifying age for auto-enrolment—a 21-year-old—could be a member of a scheme and, if the scheme closes, we still want them back in the new scheme. That would not have happened as the legislation was originally drafted, and the amendments tackle that.

I shall run through the amendments succinctly. The technical amendments will amend sections 2, 5, 6 and 54 of the 2008 Act to maintain the policy intent. This is not about new policy, but about making the legislation do what it was always intended to do. Taken together, they have the following five purposes: first, they will ensure that, in continuity of scheme membership cases—as I have just described—re-enrolment must take effect from the day after the day on which the jobholder ceases to be an active member of a qualifying scheme; if the scheme ceases to be a qualifying one or if a period were prescribed within that period.

Secondly, the amendments will ensure that there is an automatic re-enrolment obligation in respect of all jobholders, not only those between 22 years and state pension age—the matter to which I have just referred. Thirdly, they will remove the unnecessary reference to a pension scheme ceasing to be a qualifying scheme under section 6(4), as that is dealt with elsewhere and, fourthly, amendments 1, 6 and 8 will correct various technical errors and cross-references. Amendment 7 is a minor technical amendment, which will repeal section 5(5) of the 2008 Act because the postponement provisions are being repealed under the Bill. As I have said, Government amendment 1 is technical and designed to restore the original policy intent.

Amendment 1 agreed to.

Amendments made: 2, in clause 4, page 4, line 11, leave out ‘for subsection (4)’ and insert ‘after subsection (1) insert—

“(1A) This section also applies to a jobholder who—

(a) is aged at least 22,

(b) has not reached pensionable age, and

(c) is not an active member of a qualifying scheme because there has been a period beginning at any time after the jobholder’s automatic enrolment date during which the requirements of section 1(1)(a) or (c) were not met (so that the person was not a jobholder for that period).

(1B) This section also applies to a jobholder who has ceased to be an active member of a qualifying scheme because of something other than an action or omission by the jobholder.”

( ) For subsection (4) of that section’.

Amendment 3, in clause 4, page 4, line 19, at end insert—

‘( ) In subsection (8) of that section omit “, after the automatic enrolment date,”’.

Amendment 4, in clause 4, page 4, leave out line 21 and insert


(a) in paragraph (a) omit “at any time after the jobholder’s automatic enrolment date,”;

(b) in that paragraph omit “or a qualifying scheme of which the jobholder is an active member ceases to be such a scheme”;

(c) in paragraph (b) omit “or the employer”;

(d) in paragraph (c) for “time” substitute “event”.’.

Amendment 5, in clause 4, page 4, line 22, leave out from ‘(inducements)’ to end of line 23 and insert—

‘(a) in subsection (1)(a) for “within the period prescribed under section 2(3)” substitute “with effect from—

(i) the day after the membership is given up, or

(ii) a day within the prescribed period (if a period is prescribed)”;

(b) in subsection (1)(b) for “within the period prescribed under section 2(3)” substitute “with effect from—

(i) the day on which the jobholder became an active member of the scheme to which the notice relates, or

(ii) a day within the prescribed period (if a period is prescribed)”.’.—(Steve Webb.)

Clause 4, as amended, ordered to stand part of the Bill.