Clause 33 - Automatic re-enrolment: exceptions where automatic enrolment deferred

Pensions Bill – in a Public Bill Committee at 4:45 pm on 9th July 2013.

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

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

This is a tidying-up clause that relates to something that we have not come across yet. We have talked about automatic enrolment, but we have not talked about re-enrolment. One of the features of automatic enrolment is that it keeps happening; enrolment happens only once, but re-enrolment follows three years later.

One of the interesting things about the early days of automatic enrolment is that firms that operate contract joining to a pension scheme—in other words, when an employee joins as part of the contract, they join the pension scheme unless they opt out, so it is a version of automatic enrolment—must, under our law, automatically enrol those who opted out of contract joining, and significant numbers of those people are saying yes to automatic enrolment. We see that as evidence that although people may opt out at one stage, giving them another prod every few years will significantly boost pension scheme membership even among those who previously opted out. Re-enrolment after three years is, therefore, an important part of the system.

We have, however, observed a potential anomaly, which clause 33 is designed to deal with. If an employer uses a waiting period, in which they do not have to  automatically enrol people, and the three-year re-enrolment falls in the middle of that period, they end up in the absurd situation of having to automatically enrol people in the middle of their waiting period because the three-year cycle has come around again. Clause 33 amends sections 5 and 30 of the Pensions Act 2008 by removing an employer’s three-yearly automatic re-enrolment duty if the worker’s re-enrolment falls in a period in which their enrolment has been legitimately postponed. An obvious legitimate postponement would be, for example, in the case of DB or hybrid schemes where postponement is allowed towards the end of the automatic enrolment period, or when the date of re-enrolment falls in the middle of a waiting period.

We are trying to deal with a situation in which there are conflicting duties and there is a question over which one takes priority. Waiting periods and transitional arrangements are designed to make automatic enrolment work, so we think that they, rather than the three-yearly date, should dominate to avoid arbitrary and odd results. Clause 33 gives us the power to suspend the three-yearly re-enrolment duty in the circumstances that I have described. I hope that the Committee will agree that the clause is a sensible piece of tidying up.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.