UK pension changes to be announced by Rachel Reeves this week

Rachel Reeves is set to announce new pension reforms this week, aimed at directing funds towards infrastructure and private businesses.

The Chancellor is expected to outline the next phase of Labour's plans during her inaugural Mansion House speech in the City of London, following her October Budget promise to "fix the foundations" of the economy.

Her address on Thursday comes amid backlash from the hospitality industry, including signatories to a letter organised by UKHospitality who warned that changes to employers’ national insurance contributions could lead to job losses.

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Treasury insiders suggest Ms Reeve's upcoming pension reforms could free up billions for crucial infrastructure and businesses. She is expected to pitch “growth brought by unlocking private sector investment, including in our financial services industry, and growth brought about by reform – both of our economy and of our public services”.

The Chancellor is also expected to emphasise "the untapped potential we have here in Britain, the opportunities available that can be realised, the partnerships that can be forged, the wealth that can be created" as "the prize on offer". This may encompass collaborations with economies in Europe, the Middle East, Asia and the US, according to the PA news agency.

Ms Reeves faced significant pushback following her Budget announcement last month, where she outlined modifications to the national insurance contributions (NICs) paid by employers. The proposed changes aim to generate over £25 billion for the Treasury by increasing the payment rate from 13.8% to 15%, while simultaneously lowering the yearly threshold at which businesses begin to pay the tax from £9,100 to £5,000.

However, in the letter sent on Sunday, 14 UKHospitality board members joined 209 businesses, including familiar names like JD Wetherspoon, IHG Hotels and Resorts, and Tortilla, to voice their concerns. They claimed that "changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon."

"Unquestionably they will lead to business closures and job losses within a year. The threshold change brings many team members into employer NICs for the first time. We estimate the threshold change may be four times the cost of the new headline rate.

"There is no capacity to pass the costs onto customers. Businesses would be reluctantly forced to raise prices by 6-8%, fuelling inflation, yet could not realistically do so as our customers are at the end of their ability to pay more.

"Instead, many businesses would have to reconsider investment and drastically cut jobs and reduce the hours of team members."

The letter read: “We know you are determined to ensure that growth is available to all. Yet this change to NICs does the opposite, balancing the books on the backs of the businesses which provide jobs to all in society, nationwide, while sparing businesses that used technology to shed jobs.”

They have suggested Ms Reeves rolls out a new NICs band between the new £5,000 and old £9,100 thresholds – with a lower 5% rate – or an exemption for lower band taxpayers who work fewer than 20 hours per week, to support workers in part-time and lower paid roles.

The concerns from the hospitality industry come after retailers also raised questions about the impact of the NICs rises last week.

Asked about complaints from businesses such as retailers about the changes to NICs, Treasury minister Darren Jones told the BBC: “I think the public would recognise that bigger businesses are more able to burden some of the contributions that we need to make to the state and actually getting the NHS back on its feet so workers who are off sick can get back to work is probably something that retailers will benefit from as well as all the other measures that we’ve put forward in the Budget.”

Asked if that means it is “tough” for big businesses, Mr Jones said: “There are measures more broadly in the Budget which we think are good for business, good for growth and good for the economy, but on tax contributions, yes it’s been designed in that way.”