In their pre-election manifesto, the Conservatives pledged to restrict pension contribution allowances for those earning over £150,000 if re-elected.

Now in office, the Government plan to progressively reduce the Annual Allowance at a rate of £1 for every £2 earned over £150,000. This means that once someone’s income exceeds £210,000, they have an Annual Allowance of just £10,000.

It is possible that Chancellor George Osborne could announce further restrictions to the Annual Allowance on Budget day, to take effect the same day. Such changes pose a potentially significant threat to pensions.

As a result, Hargreaves Lansdown is encouraging earners currently eligible to contribute up to £40,000 to act now and capitalise on 45 per cent tax relief while they still can. The firm calculates that the potential cost in lost tax relief to someone earning £210,000 or more could be £13,500.

Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “Right now, anyone earning over £150,000 who is planning on making pension contributions this year should give serious consideration to making their investment ahead of the Budget, just in case the Chancellor brings down the shutters on 8 July.”

The previous Government also announced in its last Budget in March 2015 that it planned to reduce the Lifetime Allowance (LTA) to £1m.

McPhail said: “The LTA has become a cap on aspiration for millions of middle-earners and should have no place in the pension system.

“We would prefer the government to leave pensions alone for a while, but if the government does intend to make further reforms to pension taxation, they should look at scrapping tax relief altogether in favour of a flat rate incentive of 33 per cent, which could be promoted on a simple ‘buy 2, get one free’ basis, together with the abolition of the LTA.”

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