Rachel Reeves to announce review of workplace pensions contributions — here's what it could mean

Yahoo

4 hours ago

Rachel Reeves is set to announce an overhaul of the pensions regime when she delivers a major speech at Mansion House this month.
The chancellor is due to appoint a commission looking at the adequacy of the pensions system, including the amount of savings among the self-employed, the state pension and auto-enrolment rates.
It was announced last July after Labour won the general election, but put on hold after the chancellor's brutal tax-hiking Budget amid anger at the pressure piled on businesses.
But two executives familiar with the plans told the Financial Times she plans to appoint the commission in the 15 July speech, with the chancellor believing the UK pensions industry has long been ripe for reform.
The chancellor's overhaul is reportedly planning to shake-up auto-enrolment rules, which mandate that staff pay at least 8 per cent of their earnings above £6,240 into the pot each year, with at least 3 per cent coming from their employer.
Experts, including the influential Institute for Fiscal Studies (IFS), have warned that the current rate of contribution will leave many pensioners without enough money in retirement.
Almost four in 10 pensioners who have worked in the private sector face a cliff-edge in retirement with the current contribution level, the think tank warned.
It called last week for 'decisive action' to create a pension system 'fit for the next generation'.
It called for an end to the system of employer pension contributions only having to be made if the employee also contributes, recommending that all employees should receive at least 3 per cent of their total pay as contributions.
And the IFS called for targeted support for those hardest hit by increases in the state pension age, as well as solutions to help people manage their pension wealth through retirement.
Former work and pensions secretary David Gauke said the IFS report was timed perfectly to coincide with the imminent conclusion of the chancellor's pensions review.
'The government should provide a secure pension income, further increases in the state pension age should be accompanied by more support for those hardest hit, and both employees and employers should gradually contribute more to help achieve greater financial security in retirement,' the ex-Tory minister, who has advised the Labour government, said.
And IFS director Paul Johnson said: 'There is a risk that policymakers have become complacent when it comes to pensions. Without decisive action, too many of today's working-age population face lower living standards and greater financial insecurity through their retirement.'
Mr Johnson said the think tank's recommendations would 'shore up the state pension, help workers save more – but only in periods when they are better placed to do so – and help individuals to make the most of their pension pots through retirement'.
The government's review will also look at the level of the state pension, currently £230.25 per week, or £11,973 per year for those who have contributed through national insurance for 35 years.
Labour has repeatedly committed to the triple lock, which increases the state pension amount by the highest of inflation, average earnings growth or 2.5 per cent.
The Department for Work and Pensions (DWP) was asked to comment.