Reform said pension tax relief is an “expensive” and “poorly targeted” policy which could be reformed to help balance the country’s budget.

Its paper, Mind the (fiscal) gap, said the Pensions Policy Institute estimated tax relief on private pensions is more than £35bn or 2.2% of GDP. The net cost of tax relief is estimated to be more than £23bn or 1.5% of GDP.

The paper said: “There is a concern that this relief is expensive, poorly targeted and does not achieve its policy objectives. It is regressive, in that it tends to benefit higher and top rate taxpayers more, and is unlikely to increase national savings rates, as much of the savings it encourages are funds redirected from other forms of saving.”

Authors said most of the relief (61.2%) is received by people aged 35 to 55 and nearly 20% of the relief is received by people below 35.

The paper also said pensioners – who currently get special treatment in terms of taxation – should be targeted.

It suggested their exemption from National Insurance contributions should be scrapped. The change would bring in £735m per year and only affect the richest (by income) 6.3 per cent of people aged over 65, the paper argued.