The shadow environment minister's concerns that changes to auto-enrolment legislation will fail to improve a 'shocking' low level of pensions saving in agriculture have been challenged by the National Farmers' Union in a pair of exclusive Pension Funds Insider interviews

Shadow cabinet member Mary Creagh MP, Labour's chief environment spokesperson, told Pension Funds Insider that she was "really shocked and disappointed to see the disproportionate impact on the agricultural sector" of the amendments to auto-enrolment legislation introduced in this year's Pensions Bill.

Last week Creagh penned an article in the newly-launched UK Huffington Post relenting that changes to the minimum salary at which auto-enrolment will take place and the introduction of a three-month waiting period for new recruits would see many agricultural workers missing out on the right to be auto-enrolled.

Creagh commissioned House of Commons library research that estimates 52,000 of the 106,000 agricultural workers (83% of the sector's workforce) that currently do not save for a workplace pension will now be exempted from auto-enrolment when the reforms are phased in from 2012. Those exempted include an estimated 37,000 seasonal workers (generally employed for less than the three-month waiting period at a time) and 15,000 low earners.

She told Pension Funds Insider that there is a "big realisation across the country that people under 40 are concerned about pensions. The government is rightly concerned about it too as the taxpayer is the pension fund of the last resort and we do need to be rebalancing the pensions burden to the employer in a scheme like NEST".

The coalition government says it introduced the waiting period for new employees to ease bureaucracy on employers. The agricultural industry is not known to be the most administration-friendly sector, but Creagh argues that the burden on the country of those missing out on pensions saving is a more important consideration.

She said: "The system should be designed to be as simple and efficient as possible, but the introduction period creates risks for people in seasonal work. Excluding temporary workers from auto-enrolment creates a double insecurity to people who already fail to enjoy the kind of rights offered in permanent employment and are less able to save for their retirement."

Creagh's campaign on auto-enrolment is part of a wider interest in battling rural poverty, and she explains that "there's a kind of bucolic myth of apple-cheeked workers enjoying a healthy lifestyle but agriculture is hard, demanding physical work. These are not people who are likely to live a long, pleasant retirement and any opportunity to allow them to save more financial resources for their old ages should be welcomed."

Union discord

James Potter, the National Farming Union's (NFU) Senior Legal Adviser told Pension Funds Insider that the shadow minister "is misunderstanding or exaggerating the proposals a bit".

He said: "Agriculture is a sector with many small and medium-sized enterprises, which are being hit quite hard by the auto-enrolment legislation. Auto-enrolling employees into pensions ties up cash flow and creates additional HR work."

Potter cited Department for Work and Pensions figures which showed that auto-enrolment could add a 1% overall cost increase to HR operations at businesses, and said the likely impact on smaller agricultural employers would be between 3% and 4%. He claimed: "Amongst small and medium sized enterprises agriculture will be hit particularly hard due to the seasonal nature of business for many of our members. We'll be seeing more churn than most other sectors and for that reason I welcome the government's introduction of auto enrolment after 12 weeks of employment rather than initially."

Speaking on the status of casual workers who are likely to be excluded from auto-enrolment obligations, Potter said: "Many seasonal workers such as students looking for summer work would rather have the cash now rather than put tiny scraps of money into a fund which may not be a good investment for them. A young migrant worker from Eastern Europe, for example, is probably not yet thinking of his retirement."

Potter claims too that pension providers do not want to accumulate "tiny scraps of money that are going to be forgotten".

He added: "I don't completely criticise what she is saying but it has to be a balance for everybody – viable for employers, worthwhile pension providers and fair for employees. I feel that the 12-week entry enrolment provision is a fair balance between the interests of employers, pension providers and workers."

Potter emphasised, however, that "overall the NFU is welcoming the pension reform. Despite our members facing fierce international competition we do recognise the social value of pensions."

On the suggestion that casual agricultural workers would prefer pay in their pocket to building up a pension pot, Creagh said: "this forgets about the employer contributions that are compulsory under auto-enrolment, plus the tax breaks that make pension saving so attractive."

Ultimately Creagh believes that no matter the legislation, agricultural workers will flock to the best pension providers. She told Pension Funds Insider: "From talking to employers it's clear there's a big demand for skilled workers. Never underestimate the power of the grapevine in this – with the waiting period optional, word will soon spread amongst the workforce as to who is offering auto-enrolment from day one, and workers will vote with their feet."

First published 08.08.2011

dbillingham@wilmington.co.uk