A government review set to look at increasing employer auto enrolment contributions has been postponed, according to reports.
Phase two of the pensions review, due to start in 2024, was slated to address the looming pension savings crisis by assessing the best ways to improve pension outcomes, also called ‘pensions adequacy’.
Concerns that many people are not saving enough for retirement have prompted calls for the government to increase the contributions required under auto enrolment (AE).
Currently, the minimum contributions for AE are 8 percent (5 percent paid by employees and 3 percent by employers). With more than 11 million new people saving into a pension since AE launched in 2012, one proposal is to build on this success by raising contributions, allowing people to save from the first pound of earnings and from age 18.
However, chancellor Rachel Reeves has put plans to discuss potential reforms on hold, according to the Financial times, after the UK’s gross domestic product shrank for two consecutive months prompting fears of a recession.
Many commentators have pointed to the national insurance contributions hike in the Autumn budget as the reason behind the decline in economic growth.
Commenting on reports that the adequacy element of the government’s pension review has been postponed, Mike Ambery, retirement savings director at Standard Life, part of Phoenix Group, said: “This is disappointing news if true as at current levels of savings we are storing up problems for the future.
“Our modelling shows that by the early 2040s, three in five people will be entering retirement with inadequate savings. We’ve argued that changes can be implemented as economic conditions allow and that a key step is to set out a roadmap so businesses and individuals know the direction of travel. In Australia they have sought to bring savings levels up over a long timeframe and a similar strategy of small, incremental change over an extended period could bring about real benefits.”
