Five new pension rules in UK will hand people extra £2,100 for their pots

Pensions reform in the UK could lead to a string of new rules - including ensuring all employees receive at least a three per cent employer pension contribution on total pay, regardless of their own contributions. The calls to the Labour Party government also call for an expanding of the automatic enrolment age range from 22-state pension age to 16-74.

The study, part of the Pensions Review conducted in partnership with the abrdn Financial Fairness Trust, has shown that 30 per cent to 40 per cent of private sector workers saving in defined contribution pension schemes may fall short of standard income benchmarks in retirement.

Jamie Jenkins, director of policy at Royal London, describes the situation as a "ticking time bomb" with serious societal and economic implications. Speaking out ahead of the five recommendations today, Jenkins said: "The Government’s review of the pensions landscape is a crucial inflection point, and a rare opportunity to put us on a different trajectory; one that gives people confidence for the future and sets us on a more sustainable path for the economy over the long term".

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It also calls for targeting increased default employee contributions at those on average incomes and above, raising the upper limit on qualifying earnings for minimum employee contributions and indexing key parameters in the automatic enrolment system to average earnings growth.

By providing a minimum three per cent employer contribution regardless of employee contributions, the proposal could benefit the 22 per cent of private sector workers who currently opt out or are not automatically enrolled.

The Institute for Fiscal Studies (IFS) has published a report with recommendations for auto-enrolment (AE) reform today (Monday September 16). Implementing these suggestions would boost retirement incomes up to £2,100 per year for those currently on track for low and middle incomes in retirement, it has been estimated.