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Chancellor Rachel Reeves has put a overview of pensions on maintain after fears it might pressure employers to extend their contributions to workers retirement pots by billions of kilos.
Reeves needs to keep away from placing any extra stress on enterprise following an indignant backlash over her Finances, which hit employers with a £25bn invoice for additional nationwide insurance coverage contributions.
Pensions minister Emma Reynolds had promised to launch a overview trying on the adequacy of retirement financial savings earlier than the top of the yr, however this has now been delayed indefinitely.
Beneath present auto-enrolment guidelines, workers should pay not less than 8 per cent of qualifying earnings into their office pension every year, not less than 3 per cent of which should come from employers’ contributions.
Many consultants consider such charges would depart many individuals with out enough retirement incomes.
Earlier this yr Phoenix Group, the UK’s largest retirement financial savings enterprise, projected that elevating the minimal auto-enrolment stage to 12 per cent would lead to an extra £10bn in annual pension contributions, shared between workers and employers.
However the Division for Work and Pensions has informed the Monetary Occasions it won’t launch the second section of its pensions overview this yr, with folks briefed on the difficulty saying Reeves had blocked the transfer.
“Rachel may be very conscious of the truth that enterprise is going through extra tax and she or he is critical about making certain that new burdens should not positioned on enterprise,” stated one individual conversant in discussions between the Treasury and DWP.
Within the first section of the pensions overview, Reeves introduced plans for a series of “megafunds” of not less than £25bn every throughout outlined contribution and native authorities pension schemes, a transfer she hopes will unencumber £80bn for funding in start-ups and infrastructure.
Though authorities officers insist the second section was not being “long-grassed”, there isn’t any new date for when it is likely to be launched. “It’s ‘TBC’,” stated one official.
A DWP spokesperson stated: “We’re decided to make sure that tomorrow’s pensioners are supported, which is why the federal government introduced the landmark two-stage pensions overview days after coming into workplace. Authorities will set out extra particulars on the second section sooner or later.”
Sir Steve Webb, former pensions minister and a marketing consultant at LCP, stated the delay was “deeply miserable” because it might lead to “but extra wasted years”.
“The Finances was the dying knell for the prospect of any critical progress on pensions adequacy,” stated Webb.
When the federal government introduced its pensions overview in July, it stated it might “take into account additional steps to enhance pension outcomes and enhance funding in UK markets, together with assessing retirement adequacy”.
Pension consultants are involved that if the delays drag on, that would compromise the retirement prospects of thousands and thousands of savers.
Analysis from the Institute for Fiscal Research this yr discovered that 30 to 40 per cent of savers in outlined contribution schemes are on target to have retirement incomes that fall under the minimal retirement residing customary set out by the Pensions and Lifetime Financial savings Affiliation commerce physique.
“It’s inflicting us a stage of concern as a result of from our perspective it’s a really crucial jigsaw piece by way of the general overview,” stated Zoe Alexander, director of coverage and advocacy on the PLSA.
“It feels to us that there’s not a second to lose by way of having this debate.”
The PLSA has known as for the federal government to step by step enhance minimal auto-enrolment contributions to round 12 per cent of a person’s wage.
Phoenix additionally stated {that a} 15-year delay in implementing this enhance might lead to a typical 18-year-old dropping roughly £35,000 in retirement financial savings.
