Guaranteed Minimum Pensions Increase Order 2019 — House of Lords, 2019-02-14
Topic: Labor
William David McKenzie (Labour, Centre-left): My Lords, I thank the Minister for explaining the purpose of the orders. On the face of it, the GMP issue is straightforward. As we heard, GMPs are designed to provide a minimum weekly pension broadly equivalent to the amount of additional state provision accrued if not contracted out. Has any assessment been undertaken of the value for money of the GMP system? My noble friend Lady Drake raised an important issue around the Lloyds judgment and the decision to equalise pension benefits. I believe she wanted to know what would happen to the guidance and how soon it could be forthcoming. Is it a question not of the GMPs themselves generally having to be made more equal but rather of other components of the package On auto-enrolment, there was a brief but good debate in the Chamber—the contributors being women—the main thrust of which, not unreasonably, was the role of women. We praise auto-enrolment but all too often overlook the fact that it still has a job to do. I could recite the roll of honour of those who made auto-enrolment happen, but you know who you are Specifically, the legislation requires that the Government do two things: renew and, if necessary, amend the upper and lower thresholds of the qualifying earnings bands; and review the level of the earnings trigger, adjusting for roundings where appropriate. As the Minister explained, the order proposes to freeze the latter at £10,000 but align the former with the lower and upper earnings limits for national insurance purposes. This widens the earnings band by some £3,500 The supporting analysis for this included a DWP review document of December 2018, which sets out the three principles adopted for the review. Subject to challenge from my noble friend Lady Drake, those principles are: will the right people be brought into pension saving; what is the appropriate minimum level of saving for people who are automatically enrolled; and are costs and benefits to individuals and employers appropriately balanced As for raising the qualifying earnings band to the UEL, this increases total pension savings by £179 million, employer contributions by £68 million and employee contributions by £85 million. Retaining £10,000 as the earnings trigger represents a real-terms decrease, which brings an additional 40,000 individuals within the target population. According to the DWP analysis, of that 40,000 some 75% of the additional savers are estimated to be women How have the Government made the judgment that costs and benefits to individuals and employers are appropriately balanced? What are the tests? The above apart, what specific additional factors have influenced the proposal before us today? Subject as always to the Minister’s reply, we have no difficulty in supporting the proposals in the order I was pleased to hear what the Minister said on tax relief and trying to address the thorny issues of relief at source and net pay arrangements. These issues have been long outstanding, certainly over more than one Government I am conscious that we are addressing these issues in the wake of the 2017 review, which involves a wider focus on auto-enrolment. It is also at a point where most of the transitional introductory phases have been accomplished. March 2018 saw staging completed for small and micro employers, while minimum contribution levels rose to 5% in April last year and are heading for 8% this April. Can the Minister say something about re-enrolment and opt-out levels As that review identified, despite its success, individuals are still not saving enough. An estimated 12 million are undersaving for their retirement and some 5.7 million are mild undersavers. The broader review, Maintaining the Momentum, charts a path for the future that will help to address some of the shortfall. Its recommendations include: reducing the lower age limit from 22 to 18; calculating pension contributions from the first pound earned; removing the lower earnings limit; and working to increase saving among the self-employed. These may be matters for another day but, like my noble friend, I do not see why they have to wait until the mid-2020s. Is the Minister satisfied with this framework Nevertheless, we continue to be enthusiasts for auto-enrolment in one of the most important public policy initiatives of recent times, bred of a consensus.