The government is on course to scrap pension tax relief for higher earners in the March Budget, according to reports.
The Chancellor is working towards a "flat-rate" plan which would see a single pension tax relief incentive of between 25% and 33% for all, people close to the Treasury have said, according to the Financial Times.
It would be a move away from the bulk of tax incentives for retirement saving being enjoyed by higher earners. Basic rate taxpayers currently make 50% of the total pension contributions but benefit from only 30% of pension tax relief.
Under the current system, workers benefit from pension tax relief at the same rate as their income tax, whether 20%, 40% or 45%.
The changes are expected to be announced in the Budget but are unlikely to come into effect for at least 12 months, to allow time for the industry and savers to prepare for the reform, according to the FT.
The policy could save Osborne billions of pounds a year - depending on where the rate is set.
A flat rate of 25% would raise more than £6bn a year, according to the FT.
The move would mean the government would be in effect paying low-income workers to invest in pensions, sending a political signal to lower earners that Osborne was on their side, after his controversial attempt to cut £4.4bn of tax credits to poorer households.
