RachelReeves is trying to fix her spending black hole today by making pensioners poorer

Rachel Reeves is set to impose a stealth tax on pensions - but it won't make today's pensioners poorer. Rather, the victims will be today's workers, who will have to get by on lower incomes once they retire in the years and decades to come.

And the change will also make it more expensive for firms to employ staff, at a time when unemployment is already rising. The pensions industry is so worried that it has written to all 650 MPs urging them to tell the Chancellor to think again.

The big announcement in the November 26 Budget is expected to be an increase in the rate of income tax. Ms Reeves confirmed this week that she won't stick to Labour's election manifesto pledge not to increase personal taxation. But she is also looking at other measures, and they include ending or limiting what are known as "salary sacrifice" pension contributions.

Private pensions are complicated, and a lot of people don't understand how they work - which is one reason they are a tempting target for the Chancellor, as some voters may not even realise they are being robbed.

But one in three private sector employees, and one in ten in the public sector, use salary sacrifice arrangements, even if some of them might not know it.

It allows them to put some of their salary into a pension fund without paying National Insurance on it.

In other words, it cuts the amount of tax workers pay - by £1.2 billion annually, in total. And, crucially, this money is being saved into pension funds, ready for when they retire.

This is vitally important. For many workers, including the vast majority of those in the private sector (where "defined contribution" pension schemes are the norm), your income in old age is directly connected to how much you put into a pension fund while you are working.

Ending or limiting salary sacrifice contributions will mean workers either save less or take home less pay, or a bit of both.

This will actually cost governments more in the future. As life expectancy rises, ensuring retired people have a decent standard of living becomes increasingly hard for any government. The state pension becomes a bigger drain on resources, as do the benefits paid to pensioners at risk of falling into poverty.

So pensioners in the future - which means people in work today - are going to need to take care of themselves, because the state won't have enough money to do it for them.

That's why it's so important to encourage people to save while they can. In fact, it's why tax breaks on pension contributions exist. They are designed to convince us that saving is worth it.

The Society of Pension Professionals has warned MPs that ending salary sacrifice schemes will not only hit workers, but will mean higher taxes for businesses too.

Spokesman Steve Hitchiner said: "Changing salary sacrifice arrangements would lead to a reduction in take home pay for millions of employees who are saving into a workplace pension, with the greatest impact for those earning less than £50,284 a year.

"It would also represent another sizeable cost to employers, despite the Chancellor's public commitment against this, and would undermine the critical role that employers play in supporting and promoting good quality pension saving vehicles."

The Chancellor's first Budget, in 2024, also put up costs for employers. With unemployment rising, the last thing we need is to make it even harder for firms to take on staff.

Extracting more taxes from pension contributions may seem attractive to Rachel Reeves, because much of the impact won't be felt for decades. But it will make many of us poorer in later life - and add to the financial challenges facing future governments.