Rachel Reeves warned pension reforms will be 'nail in coffin' for UK businesses

Rachel Reeves has been warned that reforms to private pensions would be a "nail in the coffin" for struggling businesses. The Chancellor is expected to announce a new review of the private pension sector in her Mansion House speech tomorrow.

The review by the Department for Work and Pensions could result in employers being forced to pay more towards the pensions of auto-enrolled workers amid concerns over the long-term stability of the state pension. There is also speculation that employers will be asked to pay National Insurance on the pension contributions they make.

But leading business groups warned that the move would further hit businesses left reeling by a hike in employers' National Insurance contributions at the autumn budget.

Craig Beaumont, the executive director of the Federation of Small Businesses, told The Telegraph: "Many firms have already stopped hiring, and for the first time since the 2008 crash, those who will contract or close now outnumber those who will grow.

"The Government must look in every corner for growth measures, rather than hiking auto-enrolment contributions and potentially levying extra NICs on top of those.

"That would be a double whammy - a nail in the coffin for job creation, targeting small employers who are disproportionately those with roles around the current thresholds."

Kate Nicholls, the chairman of UK Hospitality, added: "In the ongoing cost of living and cost of doing business crisis, if costs increase further hospitality businesses will have to make some very tough decisions and this will include curbing operating hours, cutting headcount and keeping a lid on pay increases for managers and middle income earners.

"At the end of the day, something has to give - you can't squeeze a quart out of a pint pot."

Employees who are auto-enrolled in workplace pension schemes currently contribute 5% of their pre-tax salary, while employers pay 3%.