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Chancellor Rachel Reeves has put a evaluation of pensions on maintain after fears it may pressure employers to extend their contributions to employees retirement pots by billions of kilos.
Reeves needs to keep away from placing any extra stress on enterprise following an offended 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 evaluation wanting on the adequacy of retirement financial savings earlier than the tip of the 12 months, however this has now been delayed indefinitely.
Below present auto-enrolment guidelines, employees should pay at the very least 8 per cent of qualifying earnings into their office pension every year, at the very least 3 per cent of which should come from employers’ contributions.
Many specialists consider such charges would go away many individuals with out ample retirement incomes.
Earlier this 12 months Phoenix Group, the UK’s largest retirement financial savings enterprise, projected that elevating the minimal auto-enrolment stage to 12 per cent would end in a further £10bn in annual pension contributions, shared between workers and employers.
However the Division for Work and Pensions has advised the Monetary Instances it is not going to launch the second section of its pensions evaluation this 12 months, with individuals briefed on the difficulty saying Reeves had blocked the transfer.
“Rachel could be very conscious of the truth that enterprise is going through extra tax and she or he is critical about guaranteeing that new burdens aren’t positioned on enterprise,” mentioned one individual accustomed to discussions between the Treasury and DWP.
Within the first section of the pensions evaluation, Reeves introduced plans for a series of “megafunds” of at the very least £25bn every throughout outlined contribution and native authorities pension schemes, a transfer she hopes will unlock £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 could 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 evaluation 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, mentioned the delay was “deeply miserable” because it may end in “but extra wasted years”.
“The Finances was the demise knell for the prospect of any critical progress on pensions adequacy,” mentioned Webb.
When the federal government introduced its pensions evaluation in July, it mentioned it might “think about additional steps to enhance pension outcomes and enhance funding in UK markets, together with assessing retirement adequacy”.
Pension specialists are involved that if the delays drag on, that might compromise the retirement prospects of thousands and 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 track to have retirement incomes that fall beneath the minimal retirement dwelling normal 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 evaluation,” 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 regularly enhance 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 enhance may end in a typical 18-year-old dropping roughly £35,000 in retirement financial savings.
