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Lord Higgins moved Amendment No. 24:


Page 3, line 24, after the second (“of") insert (“10 or more").

The noble Lord said: My Lords, this amendment relates to whether individual companies should have an obligation to provide stakeholder schemes to their employees. The purpose of the amendment is to suggest that there should be some restraint on that inasmuch as very small firms may find that an onerous commitment. I notice with interest on a later amendment that the Government themselves are becoming rather worried about the way in which particular schemes may impose an obligation on employers. The amendment is seeking effectively to put that particular point to the Government. Having said that, I believe it ties in to some extent with the consultative documents. I believe I am right in saying that these are the Green and Orange ones now related to employers' access and the Government's proposals and to the question of clearing arrangements as regards contributions. Although it would not be right to act as consultees in this context--that has been happening outside this Chamber--the Government might wish to indicate the extent to which their proposals on those two documents have been favoured. I was struck by the reaction of the Institute of Directors to the brief on employees' access:


The institute also argues--and this is very relevant to the amendment--


    “If an access requirement is to be imposed on employers at all, there should certainly be an exemption for smaller employers. Office of National Statistics figures for September 1997 (the latest available) show that exempting firms with up to ten employees would exclude 83% of employers but only 20% of employees."

I wonder to what extent those points were reflected in other representations made to the Government, and in particular whether representations have been made on behalf of small firms that they should not have that additional burden placed upon them. I beg to move.

Lord Renton: My Lords, my noble friend made a very valid point. The precedents to which he rightly referred are concerned with much simpler circumstances than will be established under the Bill. For each employer, in respect of each of his employees, to have to enter into the exceedingly complicated and sometimes obscure provisions that are to be applied under the new stakeholding scheme does not seem

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reasonable. The precedents that my noble friend quoted make a strong case for his amendment. I hope that the Government will look at it sympathetically.

Lord Goodhart: My Lords, again I am unable to support the noble Lord, Lord Higgins. There is obviously an element of burden on small employers in particular. We certainly have concerns about that, and for that reason we joined the Conservatives and the noble Lord, Lord Higgins, in opposing the proposal that small employers should not be required to pay the working families tax credit through the payroll. That step placed a burden on employers without conferring any particular benefit on employees.

In this case, if employers with fewer than 10 employees are excluded, the effect will be that those employees will to a large extent be excluded from the benefits of stakeholder pensions. They will not get access to a designated pension through their employer, which we believe will be of real detriment to them. For that reason, while having some sympathy for the motives behind the amendment, we are unable to support it.

Baroness Hollis of Heigham: My Lords, Amendment No. 24 limits the application of the employer access requirement to those employers with 10 or more relevant employees--an issue raised in Committee. I said then that our purpose in introducing the requirement on employers to offer access is twofold. We want to be sure that stakeholder pension schemes can deliver better value for money and we want to encourage people to join them. We therefore need a scheme that is cost-effective and as simple as possible. We think it right that employers should play a part in helping to make that a reality for people who cannot join an occupational scheme.

9.30 p.m.

The pensions Green Paper proposed that employers would have to designate and provide information about a stakeholder pension scheme for all those employees to whom the requirement applies. They would then allow scheme representatives access to those employees and offer payroll deductions for those who choose to join the scheme. Employers who already offer an occupational scheme to all employees will not be affected and other employers will be exempt in respect of any of their employees who could join an occupational scheme or those whose earnings fall below the LEL (lower earnings limit) for paying National Insurance contributions.

The Green Paper also sought views on whether the access requirement should be voluntary for particular groups of employers, reflecting our commitment to minimise the impact on business of this new requirement. After we debated this issue in Committee, we issued a further consultation paper setting out more detailed proposals. Some people have been disappointed that we did not propose an exemption based on the number of employees working

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for an employer. There have been concerns that the additional burden and extra costs might be disproportionate for small businesses.

Perhaps I may expand a little on our thinking. We are concerned that prescribing an exemption at a specific level could itself have a distorting effect on business, by influencing employer decisions about staffing levels and whether to go above or below the specific level. This is an argument we had on the WFTC, as I am sure your Lordships will well recall. It could limit our ability to make stakeholder pension schemes widely available through the workplace. Only about 200,000 of over 1.2 million employers in this country have 10 or more employees.

Adopting this amendment would mean exempting around 84 per cent of all employers in this country from the scope of the Bill. Whereas a high proportion of larger employers already offer an occupational pension scheme, smaller employers are much less likely to do so. It is precisely among the smaller employers that the current problem exists of their employees not going into a scheme. If we followed the noble Lord, we would accentuate that problem. At the moment, less than one in five working companies of under 20 has an occupational pension scheme. The proportion would be even higher if it was under one in 10. However, nearly half of those in companies of under 20 are in an occupational scheme. That shows that the problem of employees not having access to a second private pension is most acute in the very small companies which the amendment of the noble Lord seeks to exclude, in which case, frankly, we do not need to bother.

At the moment we are not proposing an exemption for employers based on size alone. We are concerned, however, that our proposals strike the right balance between the need to ensure wider access to good value pension schemes and the impact upon small businesses. We recognise that our detailed proposals have prompted a great deal of debate. We are currently evaluating them in the light of the responses received and will be considering them further.

In any case, our detailed proposals will be set out in regulations. That will give us the flexibility to prescribe exceptions to the access requirement if it became clear that that was justified either in the light of consultation or through the experience of operating schemes. We believe that that is preferable to specifying any possible further exemptions in primary legislation.

Lord Higgins: My Lords, I thank the noble Baroness for giving way. One particular concern is that this would pose a burden if done through the payroll rather than by people who become members of a stakeholder scheme doing it by direct debit, which seems equally efficient. Would the noble Baroness be prepared to consider that the size of the firm is related to whether or not this has to be included in its payroll? This echoes the discussion we had on WFTC.

Lord Renton: My Lords, before the noble Baroness replies, perhaps I may ask another question which is closely related and just as relevant. She has told us that

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84 per cent of employers would be affected if the amendment is carried. However, the important point is, what percentage of employees would be affected? Does she have that figure?

Baroness Hollis of Heigham: My Lords, approximately 80 per cent of firms employ under 10 people, and approximately 75 per cent of employees work for larger firms. However, the point is that they work for firms where there is already an occupational pension scheme because such schemes are to be found in the larger firms. Therefore, our problem is that the people to whom we most want to offer stakeholder pensions are precisely those who would not or might not have access to any such scheme were the amendment tabled by the noble Lord to be carried.

I realise that this is Report stage and not Committee, but did I understand the noble Lord, Lord Higgins, to say that he accepted that employers should continue to be required to make available to employees information in relation to a registered stakeholder scheme, but that he felt that employers should not subsequently need to handle the payroll deductions? Is he making a distinction between the two processes?


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