Treasury plans to restrict salary sacrifice to £2,000 a year will push up costs for employers and employees and mean less saving in pensions, the Society of Pension Professionals (SPP) - which represents 15,000 pension advisers - has warned.

It is estimated that 8m workers currently use salary sacrifice and about 3m will be hit by the salary sacrifice cap.

The government says the lost revenue from salary sacrifice runs into billions and is spiralling upwards. It also says there are already other incentives to encourage pension saving including tax relief.

The SPP has written to MPs providing an explanatory note on the impact cutting salary sacrifice will have on, “hundreds of thousands of businesses and millions of workers.”

In the Budget, Chancellor Rachel Reeves announced that salary sacrifice for pensions will be restricted to a limit of £2,000 per annum, per person from April 2029.

The explanatory note sent by the SPP is designed for use when MPs consider the issue in Parliament. The SPP says it will also help MPs explain the changes to their constituents.

The paper explains what salary sacrifice is, who the restrictions will impact, the effect on employers, employees and the economy.

The briefing also advises on next steps – suggesting that employees and employers should carry on taking advantage of salary sacrifice given these changes do not take effect until April 2029, adding that “…once the restrictions come into force, salary sacrifice will still be worthwhile as savings can still be made, they will simply be less generous than they currently are for those with personal pension contributions above £2,000 per annum.”

Steve Hitchiner, chair of the Society of Pension Professionals Tax Group, said: “The decision to restrict salary sacrifice for pensions will result in higher costs to employees and employers, along with less saving in pensions when more saving is needed. The additional revenue raised by the Exchequer will both diminish and is uncertain.

“Nevertheless, employers and employees should continue to use salary sacrifice where possible and pension saving remains the most effective means of saving for later life.”

The SPP represents providers of advice and services to pension schemes, trustees and employers. It has more than 90 corporate members - who collectively employ over 15,000 pension professionals.