Rachel Reeves slammed for ‘cowardly’ move that will leave pensioners struggling. (Image: Getty)
Chancellor Rachel Reeves has come under fire after indefinitely delaying the second phase of a crucial pensions review, a decision branded as “cowardly” by experts who warn it could leave future pensioners worse off.
The move, reportedly driven by fears of adding financial strain on businesses, could mean workers lose up to ￡35,000 in potential savings.
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Experts say the delay risks undermining efforts to address dwindling pension pots and ensures millions are “sleepwalking into an impoverished retirement.”
Tom McPhail, a pensions expert, told The Telegraph: “This Government seems to be developing an unfortunate habit of failing to carry through on promises that were made during the election campaign.
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Reeves has come under fire after indefinitely delaying the second phase of a pensions review. (Image: Getty)
“If the Government won’t do it, they should appoint someone else to do it. To just do nothing looks cowardly.”
The delay follows growing criticism of Labour’s maiden Budget, which increased employer National Insurance contributions and added pressure to businesses already grappling with economic challenges.
Under the current system of auto-enrolment, introduced in 2012, employees contribute at least 5% of their qualifying earnings to workplace pensions, while employers add a minimum of 3%.
While participation in workplace pensions has surged, many argue the 8% total contribution falls far short of what’s needed for a secure retirement.
Phoenix Group analysis shows that raising contributions to 12% could increase a typical 18-year-old’s pension savings by nearly ￡96,000.
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The delay follows growing criticism of Labour’s maiden Budget. (Image: Getty)
However, a five-year delay in implementing reforms could cost savers ￡10,000, while a 15-year delay could mean losing up to ￡35,000.
Tim Middleton of the Pensions Management Institute said: “It’s always been recognised within the industry that 8% was never realistically going to fund an adequate retirement.
“By delaying this second phase, it means potentially millions of people are going to have a poorer retirement outcome as a result.”
Labour’s decision comes weeks after Reeves’s Budget, which increased employer National Insurance contributions from 13.8% to 15%.
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Business leaders warned the move could freeze pay rises, cut jobs, and shrink pension contributions.
Reports suggest phase two of the pensions review, initially promised before the end of 2024, was shelved to avoid additional costs for employers.
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This phase was expected to tackle the issue of low contribution rates and propose increases to ensure workers save enough for retirement.
Martin Willis of Barnett Waddingham said: “By delaying this review, there is a risk that a generation of people will struggle to retire when they want to and will struggle to get even the basic retirement.”
The Government has yet to confirm when phase two of the review will begin. A spokesperson said: “Creating wealth and driving growth is at the heart of our plan for change. The Government will set out more details on the second phase in due course.”