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Chancellor Rachel Reeves has put a evaluate of pensions on maintain after fears it might power employers to extend their contributions to workers retirement pots by billions of kilos.
Reeves desires to keep away from placing any extra stress on enterprise following an offended backlash over her Price range, which hit employers with a £25bn invoice for further nationwide insurance coverage contributions.
Pensions minister Emma Reynolds had promised to launch a evaluate trying on the adequacy of retirement financial savings earlier than the top of the 12 months, however this has now been delayed indefinitely.
Beneath present auto-enrolment guidelines, workers should pay a minimum of 8 per cent of qualifying earnings into their office pension every year, a minimum of 3 per cent of which should come from employers’ contributions.
Many consultants imagine such charges would go away many individuals with out sufficient retirement incomes.
Earlier this 12 months Phoenix Group, the UK’s largest retirement financial savings enterprise, projected that elevating the minimal auto-enrolment degree to 12 per cent would lead to a further £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 evaluate this 12 months, with individuals 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 he or she is critical about guaranteeing that new burdens will not be positioned on enterprise,” mentioned one individual acquainted with discussions between the Treasury and DWP.
Within the first section of the pensions evaluate, Reeves introduced plans for a sequence of “megafunds” of a minimum of £25bn every throughout outlined contribution and native authorities pension schemes, a transfer she hopes will release £80bn for funding in start-ups and infrastructure.
Though authorities officers insist the second section was not being “long-grassed”, there isn’t a new date for when it may be launched. “It’s ‘TBC’,” mentioned one official.
A DWP spokesperson mentioned: “We’re decided to make sure that tomorrow’s pensioners are supported, which is why the federal government introduced the landmark two-stage pensions evaluate 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 guide at LCP, mentioned the delay was “deeply miserable” because it might lead to “but extra wasted years”.
“The Price range was the dying knell for the prospect of any critical progress on pensions adequacy,” mentioned Webb.
When the federal government introduced its pensions evaluate in July, it mentioned it might “think about additional steps to enhance pension outcomes and improve 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 hundreds of thousands of savers.
Analysis from the Institute for Fiscal Research this 12 months 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 commonplace set out by the Pensions and Lifetime Financial savings Affiliation commerce physique.
“It’s inflicting us a degree of concern as a result of from our perspective it’s a really essential jigsaw piece by way of the general evaluate,” mentioned 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 referred to as for the federal government to steadily improve minimal auto-enrolment contributions to round 12 per cent of a person’s wage.
Phoenix additionally mentioned {that a} 15-year delay in implementing this improve might lead to a typical 18-year-old shedding roughly £35,000 in retirement financial savings.
