My Lords, I support my noble friend’s amendment. Auto-enrolment has, initially, clearly been a success and the Government deserve credit for implementing the policy. But we should recognise that we are just at the beginning: although it has been up and running for 18 months, we are just approaching the point in April this year when smaller and medium-sized employers, those whose largest PAYE scheme covers between 50 and 249 employees, have to commence their duty.
There have already been a range of changes to the process, implemented by regulations, resulting from a review of early live running. Those changes mostly came into force last November, although some are due this coming April. The consultation on the draft regulations also canvassed views on other changes, including the proposition of excluding a certain category of worker from auto-enrolment. It sought more information on three situations, identified that it had a substantive response to the use of an exception, and committed to publish the results, with government proposals and a further consultation. When will the results be published? Will it be before Report? At the very least, can the Minister provide us with a list of the circumstances being considered, if those extend beyond the three identified in the briefing note, which states:
“The initial evidence suggested that there is a case to re-examine the appropriateness of the employer duty in some, very carefully specified, circumstances”?
However, as my noble friend has clearly set out in the amendment, the power taken in Clause 37 is a very wide one.
The circumstances covering someone handing in their notice, where the notice spans the automatic enrolment date, and where an active scheme member gives notice of retirement and stops making contributions could, it is suggested, be the subject of specific amendment. As for those individuals with fixed or enhanced protection for their lifetime allowances, the Minister might tell us how an exclusion might be framed so that the employer could operate without input from the worker. That those circumstances need to be addressed to avoid detriment to workers is clear, but at present the encouragement from HMRC is to do so by opting out. If the system for exemption depends on the worker lodging the existence of enhanced or fixed protection, perhaps with some validation from HMRC, I am not sure that that is a more effective route than the worker simply opting out.
If the rationale for Clause 37 is based on just those three circumstances, I am bound to say that it is not overly convincing. If we are to understand that a range of other circumstances have been identified which justify the clause, we must be entitled to know what they are. The Government must be aware of them from representations that they have already seen. The briefing note sets down some core policy principles against which suggested exclusions are to be tested. One of these is:
“Are the individuals unlikely to benefit from pension saving?”.
This has echoes of some of the challenges to auto-enrolment when the policy was first originated and being developed, particularly around older women just approaching retirement.
It is entirely reasonable that there will be changes to the operation of auto-enrolment arising from practical experience, but we should be cautious of wide powers to remove the employer duty of enrolment. That is the cornerstone of the policy. Of course, we are mindful that the duty has already in practice been narrowed by aligning the starting point with the level of the income tax personal threshold, thereby removing thousands of the low-paid from its benefits. We are also mindful that there is a subtext to the overall Bill about generating savings for the Treasury, so my noble friend is right to be cautious about this clause.