Scrapping salary sacrifice, rumoured to be part of the 8 July Budget, would do more harm than good but is likely to be high up on the Chancellor's agenda, providers have said.
Salary sacrifice, where employees give up part of their salary in exchange for other benefits including pension contributions, currently costs the government about £15bn a year.
The benefit means as workers earn a lower salary both the worker and their employer pay lower National Insurance (NI) contributions. Employers can pay part or all of the NI saving into the worker's pension, but it is not mandatory.
Ex-pensions minister Steve Webb believes the tax break could be scrapped by the government in next week's summer Budget.
Speaking earlier this month, he said it would be very surprising if the Treasury was not looking at the possibility of money saving through the removal of salary sacrifice.
However, providers believe the policy is a "force for good" and it would be a mistake to scrap it entirely.
SimplyBiz director of workplace solutions Tom Nall said it is highly likely the Chancellor would target the benefit in his speech.
He said: "I think it is a real possibility. It is going to be high on their list."
Nall said salary sacrifice, also called salary exchange, was often used by larger organisations who had established employee benefits policies in place. However, it had not been widely adopted in the small to medium sized business sphere.
"Salary exchange is used by large organisations with benefit set ups that can handle it. It has that quality about it" he said.
"I really hope it stays as it is a force for good." However, he added it was a benefit that was "not entirely universal" in its application across the UK workforce.
Barnett Waddingham self-invested technical specialist James Jones-Tinsley (pictured) said salary sacrifice was "low hanging fruit" on the Chancellor's money saving hit list.
He said: "I can understand why the government is looking at this as part of its push to balance the books.
"But HMRC was almost promoting this a few years ago. It was seen as good business practice because it is a ‘win-win' for both employees and employers."
Jones-Tinsley also pointed out it would not just affect pension contributions as different employee benefits were involved. Aside from pensions other salary sacrifice benefits include childcare vouchers, cycle to work schemes and company cars.
"It would be a real shame if it goes," he added.
Jones-Tinsley suggested a half-way house instead of scrapping the policy altogether. He suggested employers could give up their NI relief.
"Scrapping it altogether would not send a good message to a lot of people," he added.
However, he also said making such a controversial change at this early point in the Conservative term would be a big statement from the Tory administration.
"I hope they do not touch it at all. It works well from an auto-enrolment perspective, but it is low hanging fruit."
The Pensions Regulator (TPR) has substantially increased the usage of its powers against trustees – posting a sharp rise in the use of formal information gathering powers and High Court production orders during the three months to the end of September....
The Pension Schemes Bill has completed its third reading, crossing its latest hurdle in the House of Commons.
An amendment to the Pensions Schemes Bill which would have seen people given a pre-booked Pension Wise appointment ahead of accessing their retirement savings has been defeated.
A proposal to ensure savers receive a Pension Wise appointment prior to accessing their retirement pot has received cross-party support in parliament, while Labour seeks net-zero pensions by 2050.
Pension scams are not just about the money lost, but the lives devastated, says Nicola Parish, so the industry must unite to defeat this scourge.