Labour will attempt to force the Government to set in stone its commitment to include small employers in auto-enrolment after warnings the Pensions Bill opens the door for policymakers to exempt such firms from the reforms.
Earlier this week, L&G warned clause 34 of the bill, designed to allow the Government to exempt certain categories of employees from auto-enrolment, could be used to exempt smaller businesses completely.
These concerns were heightened by a Department for Work and Pensions’ briefing paper setting out four “core principles” for the clause to be applied, including: “Is the employer able to arrange membership of a scheme without unreasonable financial or legal risk?”
L&G pensions strategy director Adrian Boulding said: “A minister could decide that for a small employer which is struggling to access financial advice, asking them to comply with auto-enrolment is unreasonable.”
This week’s Money Marketing reveals that Labour shadow pensions minister Gregg McClymont plans to table an amendment which would prevent the Government from using clause 34 to exempt certain types of business from auto-enrolment.
A spokesman for McClymont says: “We will put forward an amendment on clause 34, curtailing its use to the kind of limited technical changes which were stated by the Government to justify the clause.
“This would not permit the exempting of classes of business from auto-enrolment.”
A DWP spokeswoman says: “The Government has no intention to use clause 34 as a way to exclude certain businesses from automatic enrolment.”
It is understood a number of Conservative and Lib Dem backbenchers have been lobbying the DWP and the Treasury to offer further concessions to small businesses struggling in the current economic climate.
Auto-enrolment for firms with fewer than 50 employees has already been delayed until June 2015, after the next general election.
Cicero director and chief corporate counsel Iain Anderson says: “There remains a very effective lobby from the small business sector to backbench MPs on this issue.
“It has been there throughout this Parliament and resonates in tough times. Government is really concerned about any ‘red tape’ impacts on firms and especially SMEs right now.”
Hargreaves Lansdown head of pensions research Tom McPhail says: “The DWP has always been clear that it does not believe auto-enrolment places an undue burden on small employers, so there is no reason to exempt them.
“Hopefully Labour’s amendment will remove any uncertainty about the future of auto-enrolment for small firms.”
Labour is also planning to table a separate amendment to the bill which would require all auto-enrolment qualifying schemes to either direct savers to an independent annuity brokerage service or offer such brokerage services themselves.
McClymont has previously raised concerns savers could lose up to a fifth of their pension income because “the market simply isn’t working”.