Major pensions review that would see millions boost pots by £11,000 DELAYED by Government

THE government has delayed the second phase of a major pensions review that is aiming to boost the retirement incomes of millions by £11,000.

The review has reportedly been put on ice amid concerns it would put a further burden on businesses, which are already under pressure from other tax measures announced in October’s Budget.

Chancellor Rachel Reeves has stepped in to delay the second stage of the review following the backlash to her Budget raid on businesses’ coffers, according to the Financial Times.

Ms Reeves had reportedly been worried the review would demand that employers increase their pension contributions, upping their costs by billions of pounds extra.

Employers are already in uproar after the chancellor increased employer National Insurance contributions in a move that will help raise £25billion for the Treasury.

The review of pensions had been announced in June as part of the new government’s mission to “boost growth and make every part of Britain better off”.  

Ms Reeves had claimed the government’s plans would give the average pension pot a boost of over £11,000 in the long-term.

The review is being led by pensions minister Emma Reynolds alongside the Treasury and the Department for Work and Pensions (DWP).

The second stage of the review was expected to be announced sometime before the end of 2024.

The DWP did not suggest that the review had been shelved “indefinitely” when approached, as suggested in the FT, but did not confirm a time frame.

A spokesperson for the DWP said: “Creating wealth and driving growth is at the heart of our Plan for Change.

“We are determined to ensure that tomorrow’s pensioners are supported, which is why the Government announced the landmark two-stage Pensions Review days after coming into office and why the Pension Schemes Bill was in the King’s Speech.

“The interim report of the first phase was published at the Mansion House event on 14 November and the final report will be published in the spring.

“Government will set out more details on the second phase in due course.”

Ms Reeves’ concerns reportedly centred around fears the review would recommend contributions would be increased from 8% to 12%, which would have a knock-on increase an amount employers pay.

Employers must currently contribute a minimum of 3% of an employees’ salary amount to their pension fund, with the remaining 5% coming directly from the employee’s pay packet.

Following the announcement of the review this summer, a Pension Schemes Bill was included in the King’s Speech.

It included a raft of new measures to help over 15million savers put aside more for later life.

Reaction to the delay from experts

The announcement of the delay of the review has been met by dismay by the pensions industry.

Helen Morrissey, head of retirement analysis at investment platform Hargreaves Lansdown, said: “The news that the second phase of the pension review has been delayed is disappointing.

“The issue of adequacy is vital and it’s a discussion that needs to happen sooner rather than later.

“We recognise that employers and households are under strain, but this review is just the first step and should set out a long-term timetable to boost savings.”

Tom Selby, director of public policy at investment platform AJ Bell, said the issue was a “ticking time bomb” and “one of the most pressing issues facing society”.

He added: “Labour has placed ‘fixing the foundations’ of the UK economy front-and-centre of its political strategy and it appears the much-anticipated review into pensions adequacy has fallen victim to this push for growth.

“Any review of adequacy would have to consider automatic enrolment minimum contributions which, in turn, would have raised the prospect of increasing those contributions and potentially the burden imposed on employers.

“In the wake of the huge tax hit firms have been forced to wear following the budget, tackling retirement saving adequacy may be viewed as less of an immediate priority.

“However, the foundations of pensions are also shaky and delaying meaningful action to address these problems will leave millions of people at greater risk of an income shortfall when they reach retirement.”

How can I start boosting my pension now?

The good news is, it’s never too late to start boosting your pension pot.

Every worker already pays into a workplace pension, unless they have opted out.

Your employer has to contribute a minimum of 3% and you pay in at least 5%. This includes a contribution from the Government, in the form of tax relief.

You also basically get more cash for free if you pay into a pension as the Government contributes on top in the form of tax relief.

This means some of your cash that would have gone to the Government as income tax is paid to your pension instead.

Increasing your pension contribution by 1% – or even more, if you can afford to do so – will see your retirement savings start racking up.

Money that goes into your pension is also invested with the aim of growing it over time, so the more you can add, the more extra you can make.

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