Commenting on the news, Damon Hopkins, Head of DC Workplace Savings at Broadstone, said: “It is great news that the Government is getting on with its promised review of pension adequacy. A myriad of studies reveal the cold, hard truth that millions of people are set to reach retirement with inadequate defined contribution savings and urgent reform is needed to avoid this ticking time bomb.
“Auto-enrolment rates look set to be a key feature of the review to ensure workers are paying enough into their pensions to secure a decent standard of living in retirement. The minimum contribution rate by an employer in the UK has been set at 3% since 2019 - by comparison Australia has just increased the minimum employer contribution rate to 12% - so this review seems overdue.
“Having said that, any changes to the minimum contribution levels are unlikely to be introduced in short-term given the Chancellor will need to strike a careful balance between introducing measures which help the long-term financial security of workers and the impact any additional costs will have on employers and the wider economy, particularly given the recent increases in National Insurance contributions and National Minimum and Living Wage rates. Inevitably, employers will need to start considering how they manage potential increased pension cost in the medium-long term.
“It will be interesting to see how the review focuses on the State Pension. For millions of pensioners, the State Pension is the bedrock of their retirement income and any changes to either the triple lock, an acceleration of State Pension Age up-ratchet or moves towards means-testing would be highly controversial.”
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