Rachel Reeves plots raid on middle-class pensions to pay for another welfare handout in this week's Budget

Rachel Reeves is plotting a fresh raid on middle-class pensions this week as she scrambles to pay for another welfare handout.To help fund Left-wing demands to scrap the two-child benefit cap, the Chancellor is targeting a £3billion raid on the 'salary-sacrifice' schemes used by millions of private-sector workers.The move echoes Gordon Brown's infamous pensions raid during the last Labour government. Experts warned it would deal a hammer blow to private-sector pensions, which already lag far behind the gold-plated arrangements for those in the public sector.With cash-strapped businesses warning they will be unable to make up the shortfall, the tax grab is likely to cut the pension pots of many workers by thousands of pounds. It is 'a tax on doing the right thing', according to the Confederation of British Industry (CBI).Former work and pensions secretary Sir Iain Duncan Smith said the Government was destroying what used to be 'the greatest pension system in the world', adding: 'This will be a huge hit on savings. The biggest victims will be middle-income earners who are trying to do the right thing.'The pension funds will pay out less to their members, so there will be less money going into the economy. But they will also have less to invest, and given that they are some of the biggest investors in the economy that is going to damage the growth the Chancellor says she is trying to achieve. It is so short-sighted, like Gordon Brown's raid on pension funds.' Chancellor Rachel Reeves (pictured outside 11 Downing Street prior to last year's Budget) is plotting a fresh raid on middle-class pensions this week as she scrambles to pay for another welfare handout Former Bank of England chief economist Andy Haldane (pictured on on the BBC1 current affairs programme Sunday with Laura Kuenssberg) said the UK could face a 'vulnerable moment' unless the Chancellor can convince financial markets she has spending under controlWarnings about the latest pension raid came as:  CBI chief Rain Newton-Smith called for spending restraint in the Budget and told the Chancellor: 'You will never be able to tax your way to growth.'  Ms Reeves vowed to use the Budget to 'grip inflation', which has almost doubled under Labour. The Treasury said rail fares would be frozen, and the Chancellor is expected to help firms and families with energy bills. Former Bank of England chief economist Andy Haldane said the UK could face a 'vulnerable moment' unless the Chancellor can convince financial markets she has spending under control. A poll for the More In Common think-tank found twice as many voters wanted the Government to cut spending than raise taxes. The Treasury said Ms Reeves would target a £1.2billion cut in benefit fraud and error.The Chancellor confirmed the state pension will rise £550 next year as a result of the Triple Lock.Under salary-sacrifice schemes, workers accept a lower wage each month and their employer makes an equivalent pension contribution. This cuts their National Insurance liability, with firms and staff usually splitting the saving.The tax break was created to encourage pension saving and costs the Treasury £4billion a year. Ms Reeves has been considering capping the salary that can be 'sacrificed' at just £2,000, saving the Treasury about £2billion.But the Financial Times reported that the Treasury now wants to save £3billion to £4billion, suggesting it will be scaled back further or axed.It comes as Ms Reeves prepares to bow to Labour MPs' demands to axe the two-child benefit cap, which will cost a similar amount – £3.5billion.Treasury sources had said this year that removing the cap was effectively off the table. But with Left-wing MPs threatening to oust Sir Keir Starmer and Ms Reeves unless they change course, it looks set to be scrapped in Wednesday's Budget.Former pensions minister Sir Steve Webb said capping salary sacrifice at £2,000 would hit 'a lot of the working people the Government says it wants to protect'. Sir Steve, a partner at the pensions consultancy LCP, said: 'You can't raise billions from this without hurting middle-income earners.' Ros Altmann, another ex-pensions minister, said the proposals would cut people's pensions and amount to a 'stealth tax on employers' who will be hit by huge administrative costs.A CBI poll found almost three-quarters of big firms would not make up the shortfall in pension contributions.LCP analysis for The Sunday Times showed public-sector pensions were up to twice as generous as private sector ones. An average private-sector worker could expect to get back £533.80 for every £100 invested over 20 years. But an NHS worker would get £1,130.20, a civil servant would receive £1,008.60 and a teacher would get £984. Share or comment on this article: Rachel Reeves plots raid on middle-class pensions to pay for another welfare handout in this week's Budget

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