Official Report: Minutes of Evidence

The Chairperson (Mr Gildernew): I welcome Hayley Ward and Richard Jordan to the Committee. Thank you for attending today. We have some queries following our earlier session, one of which is on the amendment. Hayley, is the Department prepared to consider an amendment, given the Committee's discussions on the issue?

Ms Hayley Ward (Department for Communities): Will you confirm what is in the amendment? Does the Committee want a review?

The Chairperson (Mr Gildernew): The wording of the amendment is:

Ms Ward: The annual survey of hours and earnings (ASHE) happens annually. Richard?

Mr Richard Jordan (Department for Communities): Good policy development should always include a review process of the implementation of the policy. We use the annual survey of hours and earnings, which is UK wide but has an NI component that is carried out by the Northern Ireland Statistics and Research Agency (NISRA). It provides data on employees and their participation in workplace pensions by industry, area and age. We intend to continue using that to assess whether there is any change in pension participation rates following the implementation of the subordinate regulations.

The Chairperson (Mr Gildernew): OK. Go ahead, Kellie

Ms K Armstrong: The Department may well look into that and have reviews. However, because of the situation that Committees find themselves in after what happened with the renewable heat incentive (RHI) scheme, we need to amend the Bill to include the scrutiny method that we require to ensure that it is future-proofed. We would prefer there to be an obligation on the Department. Is there an issue with us having that obligation for a report in the Bill? We will need to find out whether its provisions are working. For example, if the age limit is lowered, how many people are taking it up? We need to make sure that the Assembly is informed and that papers are laid for us.

Mr Jordan: ASHE looks at the age categories of those who participate in pension saving. As the participation of people in the age range of 16 to 21 is quite low, the data for that is neither robust nor reliable. There is no way around that. ASHE is a survey of the working-age population in Northern Ireland. We use it every year, and it is our main route for data collection. There is no other route available to us for that.

The Chairperson (Mr Gildernew): I am concerned that you are saying that it is not robust and reliable. If the one that you are pointing us towards, which will be the main source of reassurance and review, is not reliable, that is a concern.

Mr Jordan: It is a concern, but it is because automatic enrolment does not currently apply to people under the age of 22.

The Chairperson (Mr Gildernew): We want to know the impact of changing that.

Mr Jordan: Exactly, and as the numbers of those under the age of 22 who participate in pension saving increase, the numbers will become apparent and visible and statistically reliable.

The Chairperson (Mr Gildernew): That being the case, it does not seem overly onerous for the Department to take the information and lay it with the Assembly.

Mr Jordan: That is a question that Hayley can talk about.

Ms Ward: That is not a decision for officials, unfortunately. That needs to go back to the Minister for consideration. The Department does not draft the Bill: that is done by the Office of the Legislative Counsel, and it decides which provisions are sensible for inclusion in the Bill. We would need to get legal advice.

The Chairperson (Mr Gildernew): That is understood, Hayley. We are asking that you initiate that process. We will, concurrently, ask for a draft to be produced for our consideration. We are all agreed that, given the value of its content, it would be reasonable and beneficial for the Department to consider tabling the amendment. I am not asking you for an answer, but I will take your commitment to look at the matter urgently, given the timing. Will you be able to reply to us by next week?

Ms Ward: We can certainly aim to. It will have to go through the Minister, so we will do our best. We will need to consider any unintended consequences that there may be, or examine whether it would set precedents. As far as I am aware, it is not something that is normally in a Bill or a requirement of the Department. We are going to need to consider that, but we will do so as quickly as possible.

The Chairperson (Mr Gildernew): OK, thank you. Do members have any other questions?

Ms K Armstrong: I do not necessarily agree that with the point about a precedent being set. I sponsored a private Member's Bill in the previous mandate that included very distinct and clearly laid out requirements for review and reporting back to the Assembly. I am concerned that the proposed amendment will go to the Minister for a decision. If the Minister decides not to take the amendment forward, the understanding should be that the Committee will. It is probably in the Department's best interests to compose the amendment if there are certain ways in which it wants to word it. You could certainly take that on board and take it forward. As the Chair said, we will bring forward our own draft.

The Chairperson (Mr Gildernew): Yes. Generally, I am not overly enamoured with precedent being used as a reason not to do things. All improvements happen for a first time at some point, so, with a positive change, we should not be overly concerned.

I agree with Kellie: I know, from direct experience in the previous mandate, as Chair of the Health Committee, that reviews were built into several key pieces of legislation. So, I do not think that inclusion of such a measure in the Bill would set a precedent. It has happened and it is in place in other pieces of legislation. Anyway, I accept your commitment to consider it.

Mr Kingston: I am looking at the impact of the Bill. The Bill is very short, and we can all see the benefits of extending automatic enrolment, especially to young people so that they do not have to wait to reach the age of 22. It puts the obligation on the employer to ensure that young people are enrolled. I have asked officials questions about the wider impact of the Bill. It will give the Department the power to reduce from 22 the minimum age at which people will be automatically enrolled. The explanatory notes, at paragraph 9, make it clear that the intention is to reduce the age from 22 to 18.

In addition, the income threshold at which automatic enrolment must take place will remain at £10,000. However, the Department will have the power to reduce the lower limit of the earnings band from which your pension contributions are calculated from the current amount of £6,240. Is the intention to reduce the amount to zero or to reduce it in phases? That is my first question. The explanatory memorandum states that the Bill will "reduce" or "repeal" the lower limit of the qualifying earnings band. What is the intention of that? Will each reduction have to come back to the Assembly and to the Committee for approval?

My understanding is that that will impact on all employees and increase their personal contributions to the pension — if the limit is reduced to zero, by, more or less, a fiver a week — but they will also get their employers contributing more; 3% if the employees are contributing 5%. We are told that many employers already calculate the pension contributions from the first pound earned. Have you done any assessment of how many employers have reduced the lower limit of the earnings band? How many are operating from the first pound earned? That will help us understand the wider impact of the Bill.

Ms Ward: At the moment, the intention is to reduce and then repeal, but the policy is still in development, so I cannot confirm that 100%. However, that is the intention.

Mr Kingston: Possibly not all in one go?

Ms Ward: No. It is to allow employers and employees time to adjust to the increased contributions.

Mr Jordan: The statutory rule (SR) would come to the Assembly and the Committee for scrutiny. It is likely that the rule would include the phase-in and the amount of reduction for each step, but that has not yet been developed, so we do not know. However, if we were to phase it in, I suspect that that is the way that it would go, so the Committee and the Assembly would be able to scrutinise that.

On employers and their contributions to pensions, many employers —.

The Chairperson (Mr Gildernew): Sorry, before we move on, you said that it was likely that it would include phasing and what else?

Mr Jordan: We have two routes: abolish the lower earnings threshold or reduce it over time, in the same way as automatic enrolment itself was introduced over time. The SR would either abolish it or phase in the reductions in steps, all of which would be clearly defined in the regulation. Whichever route was decided on in development, the SR would come to the Committee and the Assembly for its usual scrutiny.

Mr Kingston: Sorry to jump in. On maintaining parity with GB, I recognise that many employers who employ people across the UK would probably see an advantage to having the same scheme.

Mr Jordan: Absolutely.

Mr Kingston: What is the position in GB? Does it vary between the different jurisdictions? Does the lower earnings limit of £6,240 apply in GB currently?

Ms Ward: Yes.

Mr Kingston: Are we likely to maintain parity with reductions that apply across the UK?

Ms Ward: Absolutely. Pension schemes in the UK are, effectively, part of a single system, because there are pensions schemes that go across all the jurisdictions. That is why we aim to keep parity with GB and why we drafted the Bill: to ensure that we have the same powers as GB, so that if and when it decides to reduce the age or the lower earnings limit, we will be in the same position in order to keep parity.

Mr Jordan: GB is ahead of us in that it has had the primary powers in place since September 2023. We are playing catch-up on those powers. We hope to bring in the regulations in tandem to maintain the approach across both jurisdictions.

The Chairperson (Mr Gildernew): Is it the case that those powers will not be enacted until they are enacted across the water?

Ms Ward: Yes.

Mr Jordan: Yes, to maintain the integrity of —.

The Chairperson (Mr Gildernew): The powers will sit there, but when something is enacted there, it will be enacted here.

Mr Jordan: Yes.

Mr Kingston: I asked several questions in one go, so I will remind you of my final question. I questioned officials previously, and I said that the measure will affect all employees. The officials suggested that a number of employers calculate pension contributions on the full salary from zero. Have you done any assessment of that?

Ms Ward: The requirements of automatic enrolment are the minimum requirements, including the lower earnings limit. That limit applies to every worker. However, depending on the individual pension scheme, some people will pay pension contributions on the whole of their earnings rather than starting from £6,240. In short, we do not have stats to show how many people fall into that category. National figures, however, show that 55% of employers have more generous pension schemes than what is set out as the minimum requirement for automatic enrolment.

The Chairperson (Mr Gildernew): Hayley, what was the policy rationale for the original £6,240 figure and for having a figure at all?

Mr Jordan: It was linked to the lower band of the National Insurance threshold. On the other side of the coin, the £50,000 figure for the upper earnings threshold was linked to the higher band of National Insurance as well. That has been there for a long time.

The Chairperson (Mr Gildernew): I do not think that there are there any other questions for Hayley or Richard.

We will need an urgent response on the potential amendment, because we have to consider the matter at our next meeting. I thank Hayley and Richard for their attendance and for addressing members' questions. We will speak to you again in due course. Thank you for that.

Members, as we have requested a draft amendment, we cannot proceed with the clause-by-clause consideration today.