Reeves considers forcing bosses to raise pension contributions

Telegraph

2 days ago

Employers face paying more towards staff pensions under plans being considered by Rachel Reeves around how retirements are funded.
A review of how much bosses and employees pay into pensions through the auto-enrolment scheme will be launched before Parliament goes into summer recess on July 22.
Current rules mean that at least 8pc of salaries are paid into pension pots, with 5pc contributed by employees and 3pc by bosses.
The review, led by the Department of Work and Pensions (DWP), is expected to examine how much more needs to be set aside for retirements, and whether the bill for the additional saving should be footed directly by employees or by employers.
The DWP review will also look at the state pension, after the Office of Budget Responsibility (OBR) warned that the cost of the pensioner benefit would be three times more than originally forecast by the end of the decade.
Life expectancy data and the impact of previous hikes in the state pension age will be considered, sources at the DWP said.
The state pension age, which is currently 66, will increase to 67 between 2026 and 2028, and then 68 between 2044 and 2046, based on current legislation. However, this could be brought forward.
The pensions industry has been warning for some time that these limits will see employees in the private sector fail to save enough for retirement.
It is estimated that as many as three in five workers due to retire in the 2040s will not have enough saved, according to Pensions UK, which says pensioners need a minimum of £13,400 a year to live.
The launch of the review was delayed after concerns were raised about the impact on employers of funding larger pension pots so soon after the National Insurance raid on companies announced in the October Budget.
'Ticking time-bomb'
It will not be officially launched in Ms Reeves's Mansion House speech on Tuesday, despite industry expectations that the Chancellor would use her speech to do so, The Telegraph understands.
Mike Ambery, of pensions company Standard Life, said: 'Something needs to be done about that ticking time-bomb.
'The questions are what should it go to, and how is that palatable? In the last year it became particularly unpalatable with increases in National Insurance for employers.
'So when is the right time, and how should we do it?'
Other countries have increased the amount being put away for workers' retirements. From the beginning of the month, Australian contributions increased from 11.5pc to 12pc, representing an extra AUD$317 (£154) saved a year for an average employee.
Auto-enrolment was introduced in 2012 by then-chancellor George Osborne to increase the number of employees privately saving for their retirements.
There was a tenfold increase in the number of employees paying into defined contributions retirement pots between 2011 and 2019.
Earlier this year, Torsten Bell, the pensions minister, who previously said the triple lock should be scrapped, kept the auto-enrolment thresholds steady.
A government spokesman said: 'We cannot pre-empt the outcome of the review with no decision being taken relating to pension contributions.
'We're reforming the pensions market to drive economic growth, ensure greater security in retirement and put more money in people's pockets.
The spokesman continued: 'Our Pension Schemes Bill will make pension pots work harder for savers, and our forthcoming Pensions Review will explore how we can take this even further to give hard-working people the retirement they deserve.
'And thanks to our commitment to the triple lock, millions will see their state pension rise by £1,900.'