A cut to the annual allowance in the Autumn Statement would hit middle-class savers who increase contributions to their pension pot later in life, the industry warns.
A report in the Financial Times this morning revealed Chancellor George Osborne is considering raiding higher-rate tax relief for the rich by lowering the threshold of the tax-free annual allowance from £50,000 to £40,000 or £30,000.
The compromise deal with the Liberal Democrats, who want cuts to higher-rate tax relief, could £600m to £1.8bn each year for the Treasury.
However the pensions industry has expressed concerns this could penalise the savings of the middle-class and accelerate the closures of defined benefit schemes.
Bestinvest MD Jason Hollands said the change could hit middle-class earner who "play serious catch up" with pensions as they near retirement.
He said: "Some might argue £40,000 is still a lot of money to save in any one year.
"That is true but the reality is that many middle class investors have to play serious catch up with pensions as they approach retirement, making bigger contributions only once their children have grown up and their mortgages are paid off and they are confronted by the reality of how much they need to boost their fund by to generate a decent retirement income."
PwC tax partner Alex Henderson agreed: "As well as undermining confidence in the stability of the pensions system for everyone, reducing the annual allowance could penalise those who deliberately planned to increase pension savings later in life, rather than save a little each year."
Macfarlanes pensions partner Camilla Barry urged people to start saving earlier rather than playing ‘catch up' in good years.
She said: "It is understood that the autumn statement might include a cut to the annual pension contribution limit for tax relief. This could affect higher paid consultants, GPs and head teachers as they are amongst the groups that benefit most from pensions tax relief.
"It may also affect others who may have accumulated more limited pensions wealth as they will have less scope to 'catch up' in good years or at the end of their careers and make up for what they may have been unable to save in the past either due to lower earnings or other commitments. "
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