Automatic Enrolment (Offshore Employment) (Amendment) Order 2020

Motion to Consider

Moved by

That the Virtual Proceedings do consider the draft Automatic Enrolment (Offshore Employment) (Amendment) Order 2020.

The Motion was considered in a Virtual Proceeding via video call.

My Lords, I shall speak also to the draft Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2020. I am pleased to introduce these instruments, which were laid before the House on 16 March, alongside my Written Statement of the same date setting out their purpose and effect. These instruments implement the conclusions of a 2018 statutory post-implementation review. The review concluded that automatic enrolment into workplace pensions should continue for eligible employees in the maritime industries, ensuring them access to a pension in the same way as workers in the rest of the UK economy. Subject to the approval of the House, the instruments will remove the sunset clauses contained in the original 2012 legislation so that it continues in force beyond the current expiry date of 1 July 2020. I am satisfied that the Automatic Enrolment (Offshore Employment) (Amendment) Order 2020 and the Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2020 are compatible with the European Convention on Human Rights.

Today’s debate relates to the operation of the automatic enrolment policy framework and will allow the Government to deliver on the conclusions of the 2018 post-implementation review, which recommended that seafarers and offshore workers remain within the scope of workplace pensions. As we are all too well aware, this is a difficult time for our citizens, our country and our economy. Many employers and workers face unprecedented challenges and trying their best to keep going and meet their legal obligations, including those relating to workplace pensions. The Prime Minister and the Chancellor have made clear that the Government will do whatever it takes to support workers and businesses as they deal with the impact of the coronavirus pandemic, and that no-one should be penalised for doing the right thing.

As part of the Coronavirus Job Retention Scheme, the Government have made available dedicated grant payments for the compulsory minimum employer automatic enrolment contributions for furloughed workers. We have prioritised this help so that businesses can better manage their fixed costs and to support the principle of saving for the future, which it is important not to lose sight of during the current crisis.

The Chancellor announced on 12 May that the scheme would be extended to the end of October. It will continue in its current form to the end of July, with changes to allow more flexibility introduced from the start of August. The Government have committed to provide more specific details on the next stage of the scheme by the end of May.

The Pensions Act 2008 and secondary legislation in 2011 brought most employers within the scope of automatic enrolment and placed duties on them with respect to qualifying workers in their employ. At that time, the Government decided to delay the extension of these duties to the maritime industries to allow time for resolution of complex issues relating to the operation of international maritime law and custom, as these impacted how the workplace pension reforms would apply to seafarers and offshore workers.

My Lords, I welcome the order and regulations, which will ensure that eligible seafarers and offshore workers continue to benefit from employer duties to auto-enrol workers into a workplace pension.

Importantly, they confirm a set of three underpinning government decisions. First, the consideration of complexities in a sector or net burden on business, which led to the original sunset clauses, has not been allowed to exclude these workers from auto-enrolment. Secondly, the Government have resisted amending the eligibility test for auto-enrolling these workers, therefore ensuring that the coverage is not diminished. Thirdly, the DWP has held to its 2017 Maintaining the Momentum report, in which it concluded that employer auto-enrolment duties should continue regardless of industry sector and size of employer.

The necessity of emergency and extraordinary financial measures in response to this pandemic can sometimes mask the risk that fundamentals around long-term sustainability get lost, which is why I welcome that the Government have maintained employer auto-enrolment duties and that the job retention scheme allows grants to cover employer statutory minimum pension contributions for millions of furloughed workers. These grants particularly benefit women and young workers, who are much more likely to be working in sectors with the highest incidence of furloughed workers.

It took 16 years to build consensus and fully implement auto-enrolment. Auto-enrolment was born in the last financial crisis with the 2008 Act. If siren voices had prevailed then and the policy had been kicked into the long grass, we would not have secured 10 million more saving and 1.6 million employers participating. It is important that auto-enrolment is maintained during this pandemic crisis, avoiding irrecoverable long-term negative consequences, particularly for younger generations who are already likely to be hit particularly hard by this pandemic.

My Lords, both these instruments refer to offshore and maritime workers who, because of their special work circumstances, have never fallen conveniently into any standard worker treatment regarding almost any working conditions you can think of. Indeed, the uncertainties and unusual working hours for these individuals have caused employers as well as government a problem in trying to squeeze them into legislation that would be appropriate for most other categories of worker.

As the Minister said, included in this group are offshore workers, such as those working on oil rigs, and seafarers, from people managing ocean liners to those on container ships. This variety of work types and circumstances has made the very issue of automatic enrolment for pensions a case in point, and the legislation embodied in the Pensions Act 2008 was no exception. As the Minister said, these workers were finally covered from 2012 following consideration of a series of complex issues relating to how the changes would fit in with international maritime law. However, the concept of “ordinarily working” in terms of periods of employment has been reasonably successful in ensuring that offshore and maritime workers are covered.

Today we discuss the renewal of this legislation, which is due to expire in the sunset clause on 1 July 2020. I would be intrigued to learn why the sunset clause was originally built in, since presumably automatic enrolment must be a good thing for all workers, even hitherto relatively prosperous oil-rig workers who have enjoyed better working conditions than many. I anticipate that it would be particularly appropriate in the case of the challenging circumstances of most seafarers, who may well endure a patchy working life, with long periods away from home potentially interspersed with periods of unemployment. I am sure that it would be particularly difficult in these uncertain Covid times for individuals to save regularly and build up their pension pot.

I remind the noble Baroness that we have a three-minute time limit.

I was not aware of that, and I do apologise.

I am sorry, but we are very tight on time. Thank you.

Understood. I shall draw my comments to a close.

I welcome the legislation: it seems a pragmatic way to protect the interests of workers who have very varied working lives and experience but all need security in their eventual retirement.

My Lords, when auto-enrolment was introduced by legislation in 2008, and subsequently amended in 2012 to include seafarers and offshore workers—albeit subject to a sunset provision—I was Chief Whip and very much aware of the long route that we travelled towards achieving cross-party support for all the provisions to improve pension saving in the UK by encouraging people to contribute towards a pension. As ever, however, there was of course careful scrutiny of the Bill and the subsequent regulations throughout, particularly by the noble Baroness, Lady Drake, and the noble Lord, Lord McKenzie, both of whom are speaking in today’s debate.

I welcome the orders before the virtual House today. I notice that my screen has gone blank, but I am hoping that others can view what is going on.

I have a couple of questions for clarification of the proposals. At paragraphs 10.2 and 10.4, the Explanatory Memorandum refers to concerns raised by stakeholders about the drafting of the “ordinarily working” test, and states that they wanted it to be made more specific for seafarers and offshore workers. What definition was proposed by those stakeholders, and why did the Government decide that it would weaken the compliance regime and undermine the policy intention?

The total net equivalent annual direct cost to business is estimated at £22 million. Paragraph 12.1 of the memorandum makes it clear that part of that financial impact falls upon employers in the charity and voluntary sector. I appreciate what the Minister has already said about the assistance given to employers during the pandemic, but clearly at some stage that assistance will come to an end and there will be a financial impact on charities and the voluntary sector. I therefore ask: which employers of eligible seafarers and offshore workers fall within the category of being charities and voluntary bodies? For example, are we talking about organisations such as the RNLI, Mercy Ships or perhaps Greenpeace?

My Lords, I too speak in favour of seafarers and offshore workers continuing to be subject to automatic enrolment if they are ordinarily working within the UK, and I support the removal of the sunset provisions that would negate this outcome. The point was raised about why the sunset provisions were there in the first place. If memory serves, it was because some of the complexities of the arrangement were still to be tackled and it was a way of enabling legislation to go forward without losing that issue.

Our position is consistent with our calling for the expansion of automatic enrolment to workers who are not ordinarily or currently covered, and aligns with the Government’s position, as we have heard from the Minister, that all sectors should be covered.

The July 2017 consultation concerning seafarers and offshore workers estimated that the number of workers on the UK continental shelf working in the UK was a little shy of 29,000, with a dropout rate of 10%. I am afraid I missed some of the Minister’s introduction but I think she suggested that the figure was now 26,000; in any event, perhaps she could confirm that. What is the split between seafarers and offshore workers? How does the eligibility for auto-enrolment align with income tax criteria? Are they the same?

We know that since the start of auto-enrolment in 2012 more than 10 million workers have been enrolled in a pension scheme but the work has not been completed, as we know. The Motion today is a missed opportunity to extend auto-enrolment to younger workers, those on lower earnings, the self-employed and those with multiple jobs; to help the gender balance; and to extend economic justice to many of those who have proved to be our front-line saviours these past weeks.

The Government’s commitment to tackling such issues by the mid-2020s will doubtless need some sort of review, given the coronavirus and changes in working patterns and practices, though it is perhaps too soon to make a call on that. What is the position of those who have been furloughed? There was the 3% top-up but can we know whether, and how many, workers would have opted out from those arrangements? The pandemic has highlighted just how—

My Lords, I am sorry but we have a three-minute time limit on this.

Understood—my apologies. I will leave it there.