2 days ago
Reeves warned pension reforms are ‘nail in coffin' for struggling businesses
Rachel Reeves has been warned that reforms to private pensions will be a 'nail in the coffin' for struggling businesses.
The Chancellor is expected to announce a new review of the private pension sector in her Mansion House speech this week, which could result in employers being forced to pay more towards the pensions of auto-enrolled workers.
The Government is concerned about the long-term stability of the state pension, which the Office for Budget Responsibility warned on Wednesday would become far more expensive by 2030 because of the triple lock.
Leading business groups told The Telegraph that requiring employers to pay more towards their workers' pensions would damage already-struggling firms, who endured a hike in National Insurance contributions under Ms Reeves' last Budget.
Employees who are auto-enrolled in workplace pension schemes currently contribute five per cent of their salary, pre-tax, while employers pay three per cent.
A review by the Department of Work and Pensions (DWP) could conclude that businesses should pay more to help their workers in old age.
There has also been speculation that employers will be asked to pay National Insurance on the pension contributions they make, which would hike costs further.
Craig Beaumont, the executive director of the Federation of Small Businesses, told The Telegraph the reforms would have a disastrous effect for firms already struggling to stay afloat.
'Many firms have already stopped hiring, and for the first time since the 2008 crash, those who will contract or close now outnumber those who will grow,' he said.
'The Government must look in every corner for growth measures, rather than hiking auto-enrolment contributions and potentially levying extra NICs on top of those.
'That would be a double whammy - a nail in the coffin for job creation, targeting small employers who are disproportionately those with roles around the current thresholds.
He added: 'We won't get growth or jobs if we get stuck in a cycle of constantly coming back with a new wave of employment costs, at the same time as the Employment legislation heaps risk and so deters new jobs.'
His call was echoed by Kate Nicholls, the chairman of UK Hospitality, which represents 100,000 pubs, restaurants and hotels.
'In the ongoing cost of living and cost of doing business crisis, if costs increase further hospitality businesses will have to make some very tough decisions and this will include curbing operating hours, cutting headcount and keeping a lid on pay increases for managers and middle income earners,' she said.
'At the end of the day, something has to give - you can't squeeze a quart out of a pint pot.'
UK Hospitality has previously warned that nearly 750 hospitality venues closed between October and December last year, an average of just over eight closures a day.
Pubs and restaurants with casual workers are expected to be hit especially hard by the Government's employment rights reforms, which will make it more difficult to hire workers on zero-hours contracts.
The pensions review will affect almost all full-time employees. While it could result in higher pension contributions for workers, bosses could decide to slash more generous schemes to cover costs, take on fewer workers or reduce wages.
The DWP's pensions review will also look at the cost of the state pension, which is expected to be three times its forecast level by the end of the decade under the Government's triple lock policy.
Sources at the department said it would look at life expectancy data and the impact of previous hikes in the state pension age. The triple lock is expected to cost more than £15bn a year by the end of the current parliament.
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.
