Guaranteed Minimum Pensions Increase Order 2019 — House of Lords, 2019-02-14
Topic: Labor
Peta Buscombe (Conservative, Centre-right): My Lords, this has been an important and helpful debate and I will do my best to respond to as many questions as possible. I thank all noble Lords who have spoken in support of automatic enrolment. It was a cross-party initiative. It seems only five minutes ago—but it was a year—that the noble Lord and I were debating this subject in very similar terms. There is support for auto-enrolment, which is a success story, but we are never complacent. There is always more to do to improve the system. I shall start with questions on the guaranteed minimum pension. I thank the noble Baroness, Lady Drake, for giving me early notice of her question about the recent Lloyds Bank case. That case endorsed the Department for Work and Pensions’ long-held position that schemes must equalise for the effect of inequalities caused by guaranteed minimum pensions. The principle of equal pensions was established by the European Court of Justice in 1990. The requirement on schemes to equalise is not a new cost; they have been aware of it and should have been planning for it for many years. My department has put forward a method that schemes can use to equalise pensions which, because of its "once and done" nature, should limit costs resulting from additional administration requirements. The department will provide guidance in the near future for schemes wishing to use the method upon which the department consulted in November 2016. The Department for Work and Pensions intends to make further changes to the guaranteed minimum pension conversion legislation to facilitate the methodology on which we consulted. We are looking to make those changes as soon as a suitable opportunity presents itself. The representative beneficiaries in the Lloyds case sought leave to appeal on two points of the judge’s decision concerning the methodology favoured by them and the requirement to provide back-payments. Leave to appeal was refused, as I am sure the noble Baroness knows The noble Lord, Lord McKenzie of Luton, asked about the assessment of the guaranteed minimum pension system. I am unable to answer a couple of those questions and will write to him. Guaranteed minimum pensions were abolished in 1997, but those which accrued before that time must be honoured by schemes which had contracted out while GMPs were accruing On auto-enrolment uprating, the noble Lord, Lord McKenzie of Luton, asked why the Government do not tackle the inequality in the tax system which means that individuals automatically enrolled into a pension scheme use net payment arrangements or are losing out on tax relief. My noble friend Lady Altmann is not in her place but I know she is particularly concerned about this. The Government recognise the different impacts of the two systems of paying pension tax relief on pension contributions for workers earning below the personal allowance. The Government will look at the current differences and explore how to make the most of any new opportunities to balance simplicity, fairness and practicality. The Department for Work and Pensions has worked and is working with the Pensions Regulator to issue guidance to highlight to employers the differences between the NPA and RAS schemes and the potential disadvantage for low earners who are not eligible for tax relief if their employers opt out of NPA schemes The noble Lord also asked how many individuals have opted out. A total of 9% did so during the implementation of auto-enrolment. The 2018 evaluation report showed initial evidence of opt-out rates having fallen since the programme was fully implemented. Of course, the department will continue to monitor re-enrolment.