Under Labour, Chancellor Rachel Reeves is cooking up probable game-changing changes to the pension system—what employers contribute to pensions. Trying to achieve better retirement savings, some experts argue that this might present a fundamentally critical issue for businesses and workers alike if not managed carefully.

Labour’s new pension plans are very contentious. With the Chancellor Rachel Reeves at the helm, this proposal is hopefully going to drive many changes in the way pensions are managed within the United Kingdom. If not treading with care, it could prove to be a “disaster waiting to happen,” some experts warn. Let’s dive into what’s happening and why people are getting so concerned.

For now, employers in the UK pay 3% of their workers’ wages to their retirement; together with what their employees are paying, it comes up to 8%. Labour is now looking to raise these figures. Through this approach, the plan is that employers are at least supposed to match what employees are paying, bringing the two totals to 50-50 each. That would mean that workers increase their savings toward retirement, but it may also pose significant challenges to businesses.

Chancellor Rachel Reeves is looking at the Australian pension system as a model. In Australia, employers contribute 11% of an employee’s wage into their pension pot. The amount will rise to 12% in 2025. This is far higher than what is paid by UK employers. The thinking would be that with increased pension contributions, workers are going to have more saved when they retire.

Reportedly, Reeves has been in consultation with pension providers and asset managers in Australia regarding how their system works and if there is a possibility that the same can be transplanted into the UK. Particularly, Melbourne-based IFM Investors and the pension provider Standard Life are leading discussions with the UK government over the matter.

According to Standard Life’s Mike Ambery, increases in pension contributions can prove to be a good investment for people and the economy of the United Kingdom in the long run. It may yield retirement savings and bring general economic benefits. On the other hand, he comments that there also needs to be a strong strategy to avoid negative impacts on economic growth or the creation of too high burdens on employers.

While these are some of the possible benefits, most people are still worried about the effect this will have on businesses, especially small ones. Tina McKenzie of the FSB has come out to express their deep concern about the proposal. She states that it is very dangerous to increase pension contributions for small businesses, strained by additional costs. According to McKenzie, adding more financial pressure to the employer might hurt the job market and overall economic stability.

Other experts also worry about unintended effects of the new pension rules. For example, some are worried that compelling companies to increase their pension contribution might lead some employers to either cut back on hiring or reduce wages in an effort to make up for the extra cost. This will hurt workers in the long run if it results in fewer job opportunities or lower pay growth.

Meanwhile, Labour is considering ways in which it can further reform the pension system. One such option under consideration would be the reduction of the age threshold for auto-enrolment of employees into pension plans. This should eventually lead to more people saving for retirement, but it is a step that requires all possible care because of prospective effects.

The Autumn Budget will be the centerpiece of opportunities to undertake these pension changes. If the government does make the final steps toward a 50-50 contribution plan, the way it is implemented and whether it succeeds in achieving those goals without major business and worker problems needs watching.

While the idea of boosting pension contributions might sound promising for better retirement savings, clearly there are many considerations that have to be weighed up here. Whatever changes are implemented, the government will have to balance the benefits against potential risks that may mean a stronger, more secure pension system is achieved without creating new problems for the economy.

Everybody will need to remain informed and, to the extent possible, understand how those developments could affect them as these discussions evolve and the details of reform become more defined. Whether you’re an employer, employee, or even someone with a curiosity about pensions, this evolving situation will bear watching in the months ahead.