AS George Osborne prepares to deliver his autumn statement, the tensions in the Coalition Government have given stronger than usual credence to the rumour that pensions tax relief will be cut for higher earners.
Tom McPhail at Hargreaves Lansdown sums up the industry response: "Investing in a pension is the most tax-efficient way to save for retirement, which is perhaps why the politicians can't resist tinkering with the rules.
"We hope that George Osborne will resist the temptation to raid our retirement savings but we aren't confident that he will be able to resist the lure of what for him must seem like easy money – the Liberal Democrats have already been vocal in their opposition of higher rate tax relief."
Alison Fleming, head of pensions at PwC in Scotland, said cuts would be "another nail in the coffin for defined benefit pension schemes", adding: "It's not just higher earners who will be impacted – this is likely to adversely affect all employees.
"With recent uncertainty over the tax regime and other features such as auto-enrolment currently being implemented, business and employees alike need a sustained period of minimal changes to the pensions regime."
Jason Hollands, managing director at advisers Bestinvest, said the growth of the low-cost self-invested pension plan (Sipp) market "has radically improved choice and access to decent investment funds but within the convenience of a single plan".
This week, the industry published a code of conduct paving the way for workplace pension charges to be shown consistently across the industry for the first time. The code for disclosing pension costs to employers in a standardised way has been developed by a working group of trade, consumer and industry bodies and pension providers.
Mr Hollands adds: "For those currently liable to the 50% rate of income tax, there is an added incentive to utilise a pension this year as this tax rate is set to drop to 45% next April. By investing up to £50,000 in a pension this tax year, and potentially mopping up any unutilised allowances from the previous three years under a rule known as 'carry forward', investors can potentially eliminate their 50% entirely and achieve £1 of investment for a net cost of 50p."
Only last week, the Department for Work and Pensions published a consultation on "reinvigorating pensions", which was broadly welcomed. But Dr Ros Altmann, pensions guru and director-general at Saga, says the Government is too hidebound by old pensions thinking, and there is an urgent need to look at more radical reforms to savings. "This consultation should be retitled 'reinvigorating retirement saving'," Dr Altmann says.
Her blueprint calls firstly for more pension flexibility.
"Currently, retirement saving is considered to be about just one product –which is the most inflexible. Money is taken from workers in younger life and they cannot touch it till later life. Then most people have to buy a totally inflexible annuity to provide an income.
"If people were allowed access to their own pension contributions if they really needed the money, the system would ensure that pension saving was safer and more suitable for many younger workers with debts and no home of their own."
Younger people should be able to save in an easy-access account which attracted an employer contribution and tax relief, but kept those locked in until later life, Dr Altmann said.
Secondly, the requirement to buy an annuity would be removed. "This offers no protection against inflation and, as annuity rates have plunged, people get poor value. Annuities are also a completely inflexible product."
Finally, a pension target would be expressed as a capital sum, not an income. "It is time to rethink pensions," Dr Altmann says. "They need an image makeover and part of that could include aiming for a sum of money, rather than aiming for income."
Meanwhile, Nationwide says the best way to help first-time buyers is to double the maximum annual investment in a cash Isa. At present, the overall Isa limit is £11,280 but only half of that can be in a cash Isa, whereas equity Isa investors have the full allowance.
Nationwide last week revealed it had accounted for over 80% of mortgage lending in the past six months, doubling its loans to first-time buyers to more than 20,000. Graham Beale, chief executive, said: "If the cash Isa limit is increased to £11,280 it will not only help savers address the inflationary pressures, it will also help borrowers struggling to raise a deposit for a home."
Dr Altmann agrees: "A basic-rate taxpayer with £10,000 in a savings account earning 3% interest receives £300 a year in interest. But they then lose £60 of that £300 in tax.
"If the rules were changed, the saver would keep all of the £300 interest. This would help them in the same way as an increase in interest rates, but without the same economic impact on other rates."