Royal London has warned that the March Budget could amount to 'daylight robbery' if the Chancellor replaces the current system either with a pension ISA or a low flat-rate of tax relief.
It is calling for any new system to provide stability and simplicity and stresses that it would be a "grave mistake" to slash the support available for pension saving.
In a report, Royal London said that the Chancellor's proposed Pension ISA, where up-front tax-relief is abolished, would "be the present government stealing funding from the next generation for the public services that they will need as our society ages".
It added that the introduction of a low flat rate, such as 25%, would take billions of pounds out of support for long-term saving, describing it as "daylight robbery at a time when society needs more pension saving, not less".
Royal London has calculated that a flat rate of 25% would be worth little more than £2 per week extra for basic rate taxpayers whilst representing a major disincentive to pension saving for higher earners.
The Group said that making further detailed changes to the limits and structure of tax relief without fundamental reform would be the "worst of all worlds, creating yet more uncertainty and complexity and missing a once-in-a-generation chance to simplify the system".
Royal London Director of Policy, Steve Webb, said:
“The March Budget could be the biggest example of Daylight Robbery since the days of Dick Turpin. A pension ISA steals billions of pounds in tax revenues from the next generation who will need the money to fund the public services of an ageing society. And if the Chancellor opts for a low flat-rate of tax relief, he will be stealing billions of pounds today from the support we give to hard-pressed savers.
"We need a reform which helps savers and offers simplification and stability, such as a generous flat rate of up-front relief combined with the abolition of the lifetime limit on pension saving. Anything else would be a huge missed opportunity”.