Chancellor Rachel Reeves is expected to outline changes to pension auto-enrolment next weekChancellor of the Exchequer Rachel ReevesChancellor of the Exchequer Rachel Reeves(Image: Ben Whitley/PA Wire)

Employers could be forced to raise contributions to staff retirement pots as part of the Labour government’s pension review, a Guardian exclusive reports. Industry sources told The Guardian that the change could be announced as early as next Monday.

The change to pension contributions is expected to form part of Chancellor Rachel Reeves‘ review of auto-enrolment pension scheme. Currently the scheme sees pension contributions of 8% of worker earnings, with employees paying in 5% and employers adding 3%.

The review will be led by the Department for Work and Pensions. It is not yet clear what amount the contribution could be raised to.

The Chancellor will outline her plans for the government’s financial services strategy, which is expected to include details of pension auto enrolment changes, at a Mansion House speech on Tuesday.

What is pension auto enrolment?

The pension auto-enrolment scheme was introduced into 2012 and was meant to ensure that every worker has access to a private, as well as their state pension.

If you have a job, your employers may offer you a workplace pension and in some cases you will be automatically provided with a pension scheme.

This is known as ‘auto enrolment’.

Your employer must automatically enrol you into a pension scheme and make contributions if all of the following apply:

  • you’re classed as a ‘worker’
  • you’re aged between 22 and State Pension age
  • you earn at least £10,000 per year
  • you usually work in the UK

When your employer does not have to automatically enrol you:

  • you’ve already given notice to your employer that you’re leaving your job, or they’ve given you notice
  • you have evidence of your lifetime allowance protection (for example, a certificate from HMRC)
  • you’ve already taken a pension that meets the automatic enrolment rules and your employer arranged it
  • you get a one-off payment from a workplace pension scheme that’s closed (a ‘winding up lump sum’), and then leave and rejoin the same job within 12 months of getting the payment
  • more than 12 months before your staging date, you left (‘opted out’) of a pension arranged through your employer
  • you’re from an EU member state and in an EU cross-border pension scheme
  • you’re in a limited liability partnership
  • you’re classed as a ‘director’ without an employment contract and employ at least one other person in your company

Your employer must write to you when you’ve been automatically enrolled into their workplace pension scheme. They must tell you:

  • the date they added you to the pension scheme
  • the type of pension scheme and who runs it
  • how much they’ll contribute and how much you’ll have to pay in
  • how to leave the scheme, if you want to
  • how tax relief applies to you

Your employer does not have to contribute to your pension if you earn these amounts or less:

  • £520 a month
  • £120 a week
  • £480 over 4 weeks