Reeves’ backdoor tax raid on pensions would cost high earners £1,800 a year

This would mean the typical high earner would lose £1,818 a year in pension contributions if employers decided to pass on the extra cost by paying less into employees’ pension pots, the analysis by wealth manager Quilter suggests.

Labour’s election manifesto appeared to rule out an increase in national insurance, along with income tax and VAT.

However, at Prime Minister’s Questions on Wednesday, Sir Keir Starmer refused to rule out increasing the rate paid by employers, as opposed to employees.

The exemption from NI employer pension contributions costs the Treasury £23.8 billion a year, according to the government’s own figures.

Pensions consultancy LCP published a paper last month predicting that Ms. Reeves would charge NI on employer pension contributions to the Budget.

He said employers could respond to the move by cutting future wage increases for their workers or raising prices.

A survey of the UK’s 2,000 largest employers this week by the Association of British Insurers (ABI) found that many firms would make their pension packages less generous if the NI exemption were scrapped.

42% of employers who pay more than the minimum 3% contribution said they would reduce the amount they pay. Two-thirds (63%) said they would be less likely to raise premiums in the future.

Quilter’s Jon Greer said: “The rumored proposal to end the National Insurance exemption on employer pension contributions would hit the most senior people.

“According to the IFS, this move could divert around £17bn a year from pension schemes, with a staggering £6bn coming from the top 10% of earners. This equates to an average success of ‘roughly £1,818 for every top 10 taxpayer, affecting around 3.3 million people.

“While this policy aims to boost public finances, it raises significant concerns about the long-term effects on retirement savings for higher earners, which will be people earning more than £60,000 a year.”

The IFS said it would be “sensible” for the government to move towards levying NI on employer pension contributions.

However, AJ Bell’s Tom Selby said it was “unlikely” the chancellor would bring in the full 13.8% NI rate, due to uncertainty over how employers would react.

He added: “If (companies) decide to pass some of the cost on to staff, it would be unlikely that they would immediately hit pay or benefit packages through a reduction in pension contributions or wages, as they will be built into their contracts .

“What is more plausible is that they decide not to increase pension contributions or salaries so much.

“Alternatively, they may decide to pass this on to customers by increasing fees and charges or delaying investment plans.”

The Treasury was approached for comment.