Calls for the Chancellor, Rachel Reeves, to avoid making changes to salary sacrifice or wider pensions tax relief in the upcoming Budget have continued to grow, with the majority (91 per cent) of pension professionals concerned about potential pension tax changes.

Pensions UK and the Federation of Small Businesses (FSB) have sent a joint letter to Reeves urging her not to introduce changes to salary sacrifice or wider pensions tax relief in the forthcoming Budget.

This comes amid widespread concern over the potential pension measures that could feature in the Budget, with a survey of Pension UK’s members revealing the scale of worry, as the majority (91 per cent) are concerned about potential pension tax changes.

The letter warned that speculation alone is already eroding saver confidence, prompting unnecessary early pension withdrawals, and creating uncertainty for schemes and employers.

Indeed, almost all (97 per cent) respondents agreed that leaks and rumours are damaging confidence in pension saving, and 87 per cent said the speculation reflects a lack of long-term policy stability.

In addition to this, almost two thirds (61 per cent) of respondents are pessimistic about the Budget itself, expecting it to worsen public perceptions of pensions, while 35 per cent have already seen increased member contact since speculation began, almost entirely about withdrawing tax-free cash.

What's more, three-quarters (75 per cent) of respondents believe savers are likely or very likely to alter retirement contributions or decisions if the rumoured reforms go ahead.

This speculation and surge in activity has also prompted difficulties for the industry, as more than three-quarters (77 per cent) of those who had experienced an increase in enquiries report challenges responding to the volume of member queries.

And the letter from Pensions UK and the FSB also warned that pension changes in the Budget could mean even more work and operational challenges, as payroll systems would need adjustment, agreements revisited, and staff resources diverted.

Respondents also emphasised the need for a careful approach to broader pensions reform, with around half highlighting simplification, fairness and incentives for lower earners as priorities, while two out of five opposed a wider review of pensions tax relief.

Capacity and public trust in the pensions industry were not the only concerns, as the letter argued that the proposed changes to salary sacrifice would also increase costs for employers and undermine the wider environment for growth.

Whilst Pensions UK clarified that it is not opposed to sensible tax reform, it argued that introducing another major shift now would create unnecessary disruption for schemes and employers.

Pensions UK executive director of policy, Zoe Alexander, said: "The pension system relies on stability and predictability. Savers and employers can only plan with confidence when the rules are clear and consistent.

"Any change to salary sacrifice would inject uncertainty into a system that needs long-term trust, not sudden shocks. It would add operational pressure for employers and risk undermining the retirement prospects of working people across the country.

“The government should provide clarity now and commit to maintaining salary sacrifice. Introducing a cap would weaken incentives to save when we are facing a generation retiring with inadequate retirement savings.

"At a time when the Pensions Commission is working to set a long-term course for pension saving, a clear commitment to stability would give savers and employers the certainty they need to keep contributing, planning effectively and supporting economic growth."

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