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, consultants believe.
Former pensions minister Steve Webb suggested that salary sacrifice cost the government about £15bn a year and that it could be a target for being cut by the government in next week's emergency Budget.
Speaking earlier this month, he said it would be very surprising if the Treasury was not looking at the possibility of saving money through salary sacrifice.
However, pension 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."
He added: "Salary exchange is used by large organisations with benefit set ups that can handle it. It has that quality about it.
"I really hope it stays as it is a force for good." However, he noted 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) echoed this, saying 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 administration.
"I hope they do not touch it at all. It works well from an auto-enrolment perspective, but it is low hanging fruit."
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