Rachel Reeves told to reform UK system as savings ‘will not be enough for retirement’

Rachel Reeves is being urged to reform the pension system

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Lisa Picardo, the chief business Officer UK at PensionBee, described these changes as “long-overdue” and crucial for expanding pension saving to millions more workers.

“Contributions made earlier in working life can be the most valuable because of compound growth,” the retirement expert stated.

There are also discussions about increasing minimum pension contributions from the current eight per cent to 12 per cent of earnings.

Picardo noted that the current eight per cent “will not be enough for most people to fund a moderate living standard in retirement”.

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She added: “Raising the level of contributions is key to ensuring savers have enough for later life.

“The Government must set out a clear plan to gradually increase minimum employer contributions (currently three per cent), giving businesses time to adapt while boosting long-term retirement outcomes.

“At the same time, higher contributions should go hand in hand with policies that get savers engaged with their pensions earlier in their careers.”

Speculation has grown that Reeves may have to break her self-imposed borrowing rules as she faces a significant gap in public finances.

The Office for Budget Responsibility (OBR) will publish its forecast on the UK economy on March 26, providing an estimate on the cost of living for British households.

It will also determine whether the Labour Government is likely to adhere to its own fiscal rules on borrowing and spending.

The UK economy is facing significant challenges, with a slight contraction in January and inflation climbing to a 10-month high of three per cent.

Recently, the Resolution Foundation warned that the UK’s fiscal headroom has vanished, noting that current labour market statistics resemble those typically observed during a recession.

Reeves’s fiscal rules stop her from borrowing for day-to-day spending, leaving cuts as one of her limited options.

Her other “non-negotiable” commitment is to ensure debt falls as a share of national income by the end of parliament.

The Treasury believes Reeves must maintain £10billion in headroom after months of economic downturn since October’s Budget. It is widely expected the OBR will confirm this financial buffer has been eliminated.

Ahead of next week, the Confederation of British Industry (CBI) has called on Reeves to implement “long overdue” changes to government spending, advocating for increased investment in innovation.

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Analysts have warned the Treasury’s fiscal headroom has been slashed since the last Budget

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The group has proposed that economic growth could be triggered if the Government commits to allocating 3.4 per cent of gross domestic product (GDP) towards research and development, up from the current 2.8 per cent.

Furthermore, the CBI has also urged Reeves to pledge an increase in capital investment by £100billion over the next five years.

Louise Hellem, the CBI’s chief economist, characterised the upcoming Spring Statement as a “pivotal moment” for hardwiring the Government’s Growth Mission into Whitehall.

The calls come amid declining business confidence and predictions of workforce reductions as Treasury officials have been engaging with leaders in the City and regulatory bodies to reshape public perception.