Rachel Reeves's pension overhaul could wipe £50,000 from your retirement pot

Approximately 3.3 million workers stand to be affected by this policy shift, which threatens not only retirement savings but also take-home pay, future wage increases and bonus payments.

The announcement arrives against a troubling backdrop: official data indicates that current workers are set to retire with 8 per cent less wealth than today's pensioners, while nearly half of the workforce is failing to save adequately for their later years.

Salary sacrifice enables employees to exchange a portion of their wages for benefits such as pension contributions or cycle-to-work schemes, with the advantage that this money avoids National Insurance deductions.

Currently, around 7.7 million workers utilise this arrangement for their pension payments. The Treasury's own impact assessment reveals that 44 per cent of these individuals sacrifice more than £2,000 annually, placing them squarely in the crosshairs of the forthcoming changes.

Analysis from investment platform AJ Bell illustrates the potential damage to retirement funds. A 35-year-old on a £50,000 salary could see their eventual pension reduced by £22,000 as they scale back contributions to offset the new charges.

For those earning £100,000, the projected shortfall climbs dramatically to £49,700.

Former pensions minister Baroness Altmann condemned the policy in stark terms. "There is no way that this measure can improve pensions. It can only make them worse," she said, warning that reduced take-home pay could prompt workers to cut their contributions or abandon saving entirely.

She described the change as "another nail in the coffin for defined contribution pensions, which were meant to be the pensions of the future," particularly following last year's inheritance tax reforms.

Tom Selby of AJ Bell echoed these concerns, arguing that savers were being "punished for doing the right thing."

He cautioned that employers facing additional costs might respond by reducing the generosity of their pension offerings, while affected workers could reasonably question whether retirement saving remained worthwhile.

The financial burden on businesses could prove substantial. Research from pension consultancy Hymans Robertson found that a mid-sized company employing 1,000 staff at an average salary of £67,000 would face costs rising by approximately £830,000, while larger firms might shoulder bills reaching £1.5 million.

Mike Ambery of Standard Life warned of "real impacts on wages, bonuses and pension contributions long-term," noting that employers might cease passing on their National Insurance savings to staff.

Questions also surround whether the policy will deliver its projected revenue.

The Office for Budget Responsibility forecasts £4.7billion in the first year, dropping to £2.6billion subsequently.

Sir Steve Webb, former pensions minister now at LCP, suggested the four-year implementation delay gives companies ample time to restructure their arrangements, meaning "there is a high probability that this policy will only raise a fraction of the amount expected by the Chancellor."