Pensions Bill

moved Amendment No. 33: 33: Clause 28, page 13, line 40, at end insert— ““( ) The Secretary of State may prescribe different transitional periods for the purposes of this section for employers of any description.”” The noble Baroness said: My Lords, Amendment No. 33 would add an additional subsection at the end of Clause 28, which is the clause which deals with transitional arrangements for money purchase and personal pensions schemes. In Committee, I raised the issues that have been raised with us by several sources, namely the cost and administrative burdens for SMEs of moving to compliance with this Bill and with the auto-enrolment requirements in particular. I remind the House that on the Government’s own estimates this Bill will cost employers £2.5 billion a year, on top of year-one costs, but this will bear disproportionately on small and medium-sized employers. On the Government’s figures, £1.2 billion will be borne by SMEs, adding around 1 per cent to payroll costs compared with 0.5 per cent for larger employers. Organisations which represent SMEs believe that the Government’s figures massively understate the administrative cost burden that will fall on SMEs and, in particular, on microemployers. In Committee, the Minister accepted that there were concerns about the impact of auto-enrolment on employers, but conspicuously failed to give the kind of assurances on which the SME sector could place any value. He did not accept that a support package for SMEs, such as that proposed by the Engineering Employers’ Federation, was necessary. He did not even commit to constructing the staging of the introduction, as envisaged by Clause 12, so that small employers were last in the queue. I return to these themes with Amendment No. 33, which would allow the transitional arrangements of phasing, as set out in Clause 28, to be specified differently for different types of employer. At present, the staging provisions in Clause 12 are envisaged to be used for different groups of employer—and it specifically so provides—but there is no such facility for the phasing provisions in Clause 28. What my amendment would allow, but would not require, is for the transitional periods in which the employer’s and employee’s contributions are reduced below the maximum to be extended for some groups of employer, so that if the transitional periods were set at the minimum of one year for all employers, with their contributions rising from 1 per cent to 2 per cent to 3 per cent over three years, they could be set at, say, two-year intervals for one or more of those stages for SMEs, perhaps giving SMEs a longer period in which to absorb the costs into their system. I am not wedded to giving support to the SME sector through either or both staging or phasing. There are other options, such as the EEF’s proposals for a special support package, which I have already mentioned. What I am keen to see is that special provisions are made in this Bill or outside it to enable support to be delivered in some form to SMEs. I remind the Minister that the economic environment in which auto-enrolment is now being developed is considerably less benign than when the Pensions Commission first came up with its proposals. We do not know what the economic circumstances will be in 2011 or 2012 in the run-up to the commencement of auto-enrolment but, even if the economy improves, as we all earnestly desire, many employers still in business may be nursing the wounds of the current trading environment. These will be additional strains to those of absorbing the one-off and ongoing costs imposed by this Bill. My amendment would give the Government some additional flexibility to respond to circumstances and deliver aid where necessary to assist in a successful launch of auto-enrolment. I hope that, if the Government cannot accept this amendment, they will have some positive proposals of their own. I beg to move.