Rachel Reeves suspends pension review to avoid extra burden on UK businesses

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Chancellor Rachel Reeves has suspended a review of pensions over fears it could force employers to increase their contributions to staff pension funds by billions of pounds.

Reeves wants to avoid putting further pressure on businesses following an angry backlash over his budget, which hit employers with a £25bn bill for extra national insurance contributions.

Pensions Minister Emma Reynolds had promised to launch a review into the adequacy of retirement savings before the end of the year, but this has now been delayed indefinitely.

Under current automatic enrollment rules, staff must pay at least 8 per cent of qualifying earnings into their workplace pension each year, of which at least 3 per cent must come from employee contributions. employers.

Many experts believe such rates would leave many people without adequate retirement income.

Earlier this year, Phoenix Group, the UK’s largest retirement savings company, projected that raising the minimum auto-enrolment level to 12 per cent would result in an extra £10bn in annual pension contributions , shared between employees and employers.

But the Department for Work and Pensions has told the Financial Times it will not launch the second phase of its pensions review this year, and people briefed on the matter said Reeves had blocked the move.

“Rachel is very aware of the fact that businesses face more tax and is serious about ensuring no new burdens are placed on businesses,” said a person familiar with discussions between the Treasury and DWP.

In the first phase of the pensions overhaul, Reeves announced plans for a series of “mega funds” of at least £25bn each into defined contribution and local government pension schemes, a move he hopes will free up £80 £1bn for investment in startups and infrastructure.

Although government officials insist that the second phase was not “long term,” there is no new date for its launch. “It’s ‘TBC,’” one official said.

A DWP spokesperson said: “We are determined to ensure tomorrow’s pensioners are supported, which is why the Government announced the historic two-stage pension review days after taking office. “The government will provide more details on the second phase in due course.”

Sir Steve Webb, former pensions minister and LCP consultant, said the delay was “deeply depressing” as it could lead to “even more wasted years”.

“The Budget was the death knell for the prospect of any serious progress on pension adequacy,” Webb said.

When the government announced its pensions review in July, it said it would “consider new measures to improve pension outcomes and increase investment in UK markets, including assessing superannuation adequacy”.

Pensions experts are concerned that if delays continue, they could jeopardize the retirement prospects of millions of savers.

Research from the Institute for Fiscal Studies this year found that between 30 and 40 percent of savers in defined contribution plans are on track to have retirement income that falls below the minimum retirement living standard set by the trade body of the Life Savings and Pensions Association.

“It’s causing us a level of concern because from our perspective it’s a very critical piece of the puzzle in terms of the overall review,” said Zoe Alexander, PLSA director of policy and advocacy.

“We believe there is not a moment to lose in terms of having this debate.”

The PLSA has called on the government to gradually increase minimum auto-enrolment contributions to around 12 per cent of individual salary.

Phoenix also said that a 15-year delay in implementing this increase could result in a typical 18-year-old losing approximately £35,000 in retirement savings.