Autumn Statement 2015: Chancellor George Osborne (pictured) has announced that the next two phases of minimum pension contribution rate increases under auto-enrolment will be pushed back to coincide with the tax year.
The minimum contribution rate for employers was scheduled to rise to 2% from October 2017 and 3% from October 2018. These increases will now come into effect from April 2018 and April 2019, respectively.
The change aims to simplify the administration of auto-enrolment for employers, particularly small businesses.
Osborne said: “Over 5 million people have already been auto-enrolled into a pension thanks to our reforms in the last parliament.
“To help businesses with the administration of this important boost to our nation’s savings, we’ll align the next two phases of contribution rate increases with the tax years.”
Stewart Hastie, partner, tax and pensions at KPMG, added: “While this may ease the pensions cost burden on employers, this just kicks the can down the road in terms of addressing the UK’s savings gap.
“It is widely accepted that the UK is simply not saving enough to fund retirement and this decision will essentially take £3 billion out of employees’ savings in the next three years.”
Nathan Long, head of corporate pension research at Hargreaves Lansdown, said: “Pushing the step up in pension contributions required under auto-enrolment back and aligning to the tax year is good news for public finances and will be welcomed by employers.
“Aligning to the tax year will make it easier for employees to plan their retirement saving for the year ahead.”
The government has confirmed that it will publish its response to the consultation on pensions tax relief in the Budget 2016.