The government has published research commissioned by HMRC, which asked questions about attitudes to salary sacrifice and tested employer reactions to three different ways in which the benefit could be 'hypothetically' cut back.

The research found that employers were most negative about the second option, which involved removing national insurance (NI) and tax breaks for salary sacrifices.

Some employers said this would eliminate the benefits of salary sacrifice and were unsure whether they would continue offering salary sacrifice for pensions in that scenario.

The suggested reform most favourably viewed was a capped salary sacrifice, which allowed for smaller amounts of sacrificed salary.

Generally, employers indicated that changing the pension system could inevitably cause confusion and risk people becoming more disengaged with pensions.

The fieldwork was undertaken from May to August 2023 and involved interviews with 51 firms, 41 of which offered salary sacrifice and ten of which did not.

Overall, it concluded that employers were positive about salary sacrifice in the current system and thought it helped to retain employees as part of the overall benefits package.

However, LCP partner, Steve Webb, said that HMRC's commissioning of research to test employer responses to potential changes to salary sacrifice suggested a "significant risk" of cuts in the forthcoming Budget.

"It is very revealing that HMRC has paid for research into the likely response from employers if salary sacrifice for pensions were to be scaled back," he argued.

"Although the research was commissioned under the previous government, the desire to raise additional revenue is, if anything, even more acute today.

"With a Chancellor reportedly looking to make up a multi-billion pound hole in the public finances in her Autumn Budget, this research suggests that changes to salary sacrifice are firmly on the agenda and likely to be considered as a potential revenue-raising measure," he concluded.

Indeed, the changes would come as a blow to many savers, with recent analysis from Penfold revealing that interest in switching to its salary sacrifice pension solution jumped by 800 per cent year-on-year.

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