The new polling, conducted among 500 business leaders, shows that a further one in ten (11%) firms have already decided to remove the benefit entirely.

Katie Close, director of tax at ICAS, said the findings were unsurprising. “The changes to salary sacrifice announced in the 2025 Budget will have long-lasting impacts for both individuals and businesses,” she said.

The cap, announced by Rachel Reeves, is due to take effect from April 2029 and is expected to raise £4.7 billion in its first year. Salary sacrifice arrangements allow employees to redirect part of their salary into a pension, reducing their exposure to tax and national insurance, while employers benefit from lower national insurance contributions on participating staff.

ICAS has raised significant concerns about the broader implications for retirement adequacy. Ms Close pointed to research by the IFS and the Pensions Commission showing that more than a fifth of private sector workers do not save into a workplace pension at all, and that around 30% to 40% of those who do are not on track to achieve an adequate retirement income.

Ms Close said: “At a time when private pension saving is already insufficient and the population is ageing, measures that disincentivise pension saving represent short‑sighted tax policy – particularly in the absence of wider reform to encourage long‑term retirement saving.”

She warned that the changes risk exacerbating existing shortfalls if employers respond by withdrawing schemes or reducing the generosity of pension provision.

ICAS also cautioned that the reforms could widen existing inequalities, including the gender pensions gap. Ms Close called for pensions policy to be “coherent, stable and long-term” so that employers, savers and the pensions industry can plan with confidence. “Without that clarity and certainty, reforms risk undermining the very outcomes they are meant to support, while potentially widening existing inequalities such as the gender pensions gap,” she added.

Standard Life’s analysis indicates that a worker earning £50,000 and contributing 5% of their salary through salary sacrifice would face an additional £40 per year in national insurance costs once the cap is introduced, while their employer would incur an extra £75. For higher earners, employer costs rise more sharply.