I fear Rachel Reeves will launch a political attack on workplace pensions in Budget, says JEFF PRESTRIDGE

Forgive me. If you or your children are pension savers, or if you have grandchildren who haven’t yet made it onto the pension ladder, I’m in danger of ruining your Sunday.

So if you’re enjoying a chip shop or treating yourself to brunch at your local Cote Brasserie (I recommend the smoked salmon and scrambled eggs), take a quick sip of coffee, take a deep breath and then (PLEASE) read up.

What I am about to say is important and will impact your financial future and that of your loved ones.

Here goes. I fear, a terrible fear, that Chancellor of the Exchequer Rachel Reeves is about to launch the biggest political attack on our corporate pensions since 1997, when Gordon Brown launched a devastating £5 billion annual tax attack on them.

If it happens – a pernicious tax on employers’ contributions to our workplace pensions – the consequences will be as dire as Brown’s attack, which led to the demise of most final salary pension schemes that ‘guaranteed’ workers a retirement income based on time worked years. and their salary upon retirement.

The current Chancellor will have turned into the pension-busting Brown of 27 years ago.

To put the matter into perspective, any pension tax on employers in the budget will seriously hamper the savings habit in this country.

It will make it more difficult for us, our children and grandchildren, to build wealth that we can draw on later in life to help us through retirement.

Overdramatic? Sensational? No. With Reeves looking to raise up to £35 billion in extra annual tax revenue from her budget on Wednesday week, it is clear to everyone that she has our pensions firmly in her sights (as well as any capital gains on share sales). and the money we want to leave to loved ones).

So on October 30, our right to take tax-free money from our pensions will likely be curtailed.

We can currently withdraw 25 percent of our pension fund tax-free, usually from age 55, with a limit of £268,275. But Reeves plans to reduce the limit to £100,000, a move that would disrupt the financial plans of many who had set aside their tax-free money for a specific purpose (for example to pay off a home loan).

There may also be limits on how much we can put into our pensions each year without losing the boost from tax relief on contributions. Currently the annual maximum is a fairly generous £60,000.

But as unwelcome as both measures would be, especially if there is a monetary cap on tax-free cash, it is the pension tax on employers that I believe will have far more catastrophic consequences. An insidious tax that matches Brown’s insidious 1997 pension tax bombing.

If Reeves wants to go bankrupt, she could abolish the National Insurance (NI) exemption that employers enjoy on the contributions they pay into their employees’ pension pots.

In light of the government’s desire to raise as much extra tax revenue as possible to meet its extravagant spending plans for the ailing National Health Service – and to finance inflation-busting pay rises for millions of public sector workers – it seems a no-brainer . as far as the Chancellor is concerned.

Last month the left-wing Resolution Foundation, whose mission is to improve the living standards of people on low to middle incomes, described this NI employer exemption on pension contributions as ‘significant and unnecessary’.

This is especially true as the majority of the compensation employees receive – including the contributions they make to their pensions – attracts NI at a rate of 13.8 percent.

How much such a move would yield depends on which think tank you listen to. The Resolution Foundation estimates that extending NI to employer pension contributions would provide Reeves with additional annual tax revenue of around £12 billion net.

The Institute for Fiscal Studies (IFS) says it would raise £17 billion a year. Like Resolution, it believes employers are getting too good a deal, calling their NI exemption ‘generous’ and ‘opaque’.

While one could argue whether such a tax grab goes against Labour’s pledge not to increase income tax, NI and VAT rates (the Institute for Fiscal Studies thinks so), financial experts believe it is the equivalent of low-hanging fruit for revenue. -hungry chancellor.

“There are no easy choices for Reeves,” said Tom Selby, director of public policy at asset manager AJ Bell, “but National Insurance contributions on employer pension contributions could be an attractive target for a chancellor with limited options available.”

However attractive this may be to the Chancellor, such a move would be enormously damaging for business, the economy and of course savers.

For employers, this would increase the cost of providing employees with pensions, which they are legally obliged to offer under so-called auto-enrolment rules.

The minimum premium percentage for automatic enrollment is eight percent (including tax benefit). This is based on an employee’s annual income between £6,240 and £50,270, with at least three of the eight percent coming from the employer. But many employers, especially large companies, go the extra mile and increase their contributions if an employee contributes more.

Unfortunately, any NI tax on employer pension contributions would force most businesses to look for ways to mitigate this. This could be done by keeping labor costs under tight control, for example by being less generous with wage increases or by reducing the workforce.

The Federation of Small Businesses has already warned that adding NI to employers’ pension costs would be a surefire way to ‘shrink small business employment even further by 2025’.

But it is more likely that any NI tax would result in many companies reducing their pension generosity to the minimum requirement under auto-enrolment. For retirement savers in their 20s and 30s, this would make it much harder for them to build a meaningful retirement fund.

Even now, about half of employees are not saving enough for retirement. This percentage will increase significantly as Reeves hits employers with the NI pension tax.

A few days ago, the Pensions And Lifetime Savings Association published a survey showing that most workers believe the minimum overall contribution for company pensions should rise from eight percent to twelve percent – ​​with employers paying at least half.

Unfortunately, if Reeves turns Brown on October 30 and launches an NI attack on employers’ pension contributions, these wishes are unlikely to be met.

David Lane, chief executive of pension provider TPT Retirement Solutions, said: ‘If the government adds National Insurance to employers’ pension contributions it would be unwelcome news for employers and pension savers.’

Unwelcome? No, it will be a disaster on par with Brown’s 1997 pension tax raid.

• Do you agree or disagree? Email me your thoughts at jeff.prestridge@mailonsunday.co.uk