Pensions Bill

My Lords, I thank the noble Lord, Lord Skelmersdale, for this amendment and hope to satisfy him that it is not necessary. Specifically he asked about percentages on opt-outs. The research done to date—and this is an ongoing programme which we will also discuss later—including whether people would participate or opt out of personal accounts, found that seven in 10 would be inclined to participate, so there is a 70 per cent participation rate and a 30 per cent opt-out rate. The noble Lord raised a point about debt and whether that is likely to be a key driver for people opting out. Clearly that will be a factor. Certainly it is quite possible that it would be in the interests of those with high interest charges. Automatic enrolment changes the default approach to workplace pension saving, but it does not make participation compulsory. Accordingly, Clause 8 ensures that people who become automatically enrolled are able to opt out, if they wish. Amendment No. 10 seeks to ensure that contributions are not collected from jobholders if they opt out before the first contribution is deducted. However, a valid opt-out completely undoes membership. Therefore, once a jobholder gives notice that they wish to opt out, the employer no longer has any right to deduct contributions from pay. Furthermore, the jobholder also becomes entitled to a refund of any contributions that may have been deducted between the day they were automatically enrolled and the point at which they gave notice of their wish to opt out. This is government policy, and the Bill already gives effect to it. Amendment No. 11 removes the powers in Clause 8(3). These are necessary to enable government to frame the process by which jobholders receive a refund of any contributions due. It may be of interest for noble Lords to know that we have started to develop more detailed plans for framing the automatic enrolment and opt-out processes. I can see that that is greeted with delight by the noble Lord. Our target is to consult on draft regulations during the early part of 2009. The eventual regulations will be subject to the affirmative procedure, so there will be plenty of time and opportunity to debate the details of the various processes. However, it might be helpful if I expand a little on our current thinking. The Bill makes clear that jobholders need to be automatically enrolled from day one. At this stage, we anticipate that regulations will provide a working window of up to 14 days from the automatic enrolment date—for example, the day the jobholder starts work generally—during which employers will be required to take whatever steps may be necessary to make the jobholder an active member of their scheme. We also expect to regulate for a concurrent 14-day window, during which the employer will be required to provide the jobholder with information about the effect of the employer duty—for example, that the jobholder has been automatically enrolled into pension saving, what the contributions will be, that they have a right to opt out, and so on. While these windows are likely to be 14 days, there will be nothing to prevent an employer from acting more quickly. In some cases it might be possible to carry out all the necessary steps within one day. Should a jobholder have a pay day during the joining window, the employer will be required to make a deduction from pay to avoid any negative impact on participation of waiting to take a large bundle of contributions at a later date. Our current thinking is that the schemes should be the source of the blank opt-out form. Once completed, the opt-out notice should be given in the first place to the employer, although it is likely there could be ways for a scheme and an employer to be notified simultaneously. Jobholders need to be given time to consider their options. We expect to propose an opt-out period of 30 days. This period will start when the jobholder is both an active member of a scheme and in possession of the information that enables them to make an informed decision. Jobholders who opt out will be treated as never having become a member of the scheme and both jobholder and employer contributions will be refunded. Regulations will propose that jobholder contributions must be refunded within 21 days or two pay days, whichever is the earlier. We do not propose to regulate in any detail on refunds of employer contributions. The manner and timing of employer refunds will be a matter between the employer and their scheme. Where the money will be during this process will depend in part on whether the employer, having deducted the amount, will have paid it over to the scheme. The requirements for payment over to the scheme are already defined in legislation. I believe that the 19-day rule operates for defined contribution schemes, so that would determine whether the money is still with the employer or whether he has paid it over to the scheme and needs to recover it or offset it against continuing payments. I hope that I have helped the noble Lord by setting out our thinking on the timescale and processes of opting out, on which we shall consult in due course. I emphasise that we do not need a specific provision in the Bill to prevent employers taking contributions once opt-out has been initiated because the Bill and the law would prevent them doing that. The noble Lord raised a good point but I hope he will accept that it is already covered.