Pensions Bill

moved, as an amendment to Amendment No. 4, Amendment No. 5: 5: After Clause 27, line 10, leave out subsection (2) The noble Baroness said: My Lords, we congratulate the Government on bringing forward their amendment to the qualifying earnings test. This is one of the issues that have been with us throughout our consideration of the Bill, and at times I wondered whether we would ever get to this stage. We have made it clear from the outset—not least to the organisations that have provided briefing to us—that the best outcome would be a government amendment. A victory in the Division Lobby may have given us a passing thrill in this House but a solution embraced by the Government gives hope for auto-enrolment arrangements which will work well in practice. Amendment No. 4 offers the possibility that existing private sector provision may be preserved and not levelled down. If Amendment No. 4 avoids levelling down by existing employers, it would, in turn, help to maintain a body of pension provision which was above the minimum and, if that were the case, it would set a market level which may encourage new employers in the market to offer more than the minimum. What is at stake is potentially important. As we know, levelling down could take the form of rewriting an existing pension scheme to meet the formula in the Bill or, more plausibly, would result in employers just saying that they are not prepared to continue with their own scheme and defaulting to personal accounts. Either way, it would result in less pension saving. At present, employers contribute more than 6 per cent to defined contribution schemes, which compares with the Bill’s 3 per cent. Admittedly, the bases are different, but I would guess that on average the difference is slightly more than 3 per cent, which, over a working lifetime, is a lot in pension provision. My probing amendment deletes subsection (2) of the new clause. At the heart of whether this new clause will do the trick is whether the regulations made under it will allow the calculations to be made at the level of the whole active membership of the scheme or whether they will directly, or indirectly, force the calculations to be made at the level of the individual. The question posed by my amendment is whether subsection (2) allows the certificate to be given at the level of the active member jobholders as a whole. I am aware that the Government changed the drafting of subsection (2) at a late stage before tabling an order to clarify its meaning, but I believe that the version in Amendment No. 4 can still be read either way. My request to the Minister is to clarify the Government’s intention of what subsection (2) is intended to mean in practice. The Minister will also be aware that the provisions in subsection (6)(e) and (f) and subsection (7) cause some concern because those provisions would allow the Government to produce regulations which were onerous in both administrative and financial terms. I have to put the Government on notice that if they produce regulations which are onerous in administrative and financial terms, the likely outcome will be the levelling down, which this clause is intended to avoid. In particular, the tolerance levels of employers for sticking with their own schemes may well be tested if, by virtue of subsection (7), significant payments are required by the regulations. The Bill does not require the Government to draft the regulations in a way that results in levelling down, but the danger is there and it is entirely in the Government’s hands. The groups with which we have discussed these issues are keen to work closely with the Government on the content of the detailed regulations so that they achieve the aim, which I think is shared by all parties, of keeping private provision going. I hope that the Government will work closely and constructively with those groups. I would be grateful for the Minister's comments on that. Lastly, I must mention subsection (9) which seems to be a rather unnecessary act of aggression. Subsection (9) contains the unusual power for the Secretary of State to repeal the whole section and, with it, the hope that levelling down might be avoided. That is unorthodox drafting. Most Bills are not drafted with such provisions. Admittedly, this Bill contains another example in Clause 69. The Minister never satisfactorily explained that one, but I invite him to explain why it is appropriate for this new clause. I even harbour a faint hope that the Minister will say that subsection (9) is a big mistake and that, if we pass this amendment today, as I hope we shall, the Government will amend it in another place. I beg to move.