Alistair Darling announced the move, which affects people earning £150,000 a year or more, during his Budget speech yesterday.
Fierce industry criticism has been issued about the government's Budget announcement that a pensions tax break for the rich would be ended.
Chancellor of the Exchequer Alistair Darling said yesterday that pension contributions from people earning £150,000 or more a year will no longer be subject to tax relief. The move comes as the government attempts to claw back some of its public deficits through tax increases - with the Budget also announcing that richer Britons will see an income tax rise from 40% to 50% next April.
Updated government debt forecasts show a 2009 deficit of £175 billion - equivalent to over 12 percent of the nation's entire economic output. Total net borrowing was also forecast to top out at 79 percent of output towards the middle of the next decade.
Reacting to the Budget, the Association of British Insurers (ABI) suggested that the pensions relief move amounted to the government "breaking its contract" to savers. Maggie Craig, the ABI's director of life and savings, added: "This is a disappointing day for pension saving. Although this move will not directly affect the vast majority of people saving for retirement, we are concerned that it sends a worrying message."
She added: "To maintain consumer confidence in the pensions system, the government must give a categorical assurance that the historic principle of pension savers receiving tax relief on their contributions will not be undermined any further."
Scottish Widows has also registered its displeasure over the move. "This is an added complication to the pensions system," Ian Naismith, head of pensions development at the firm, said.
"It is possible that with the attractions of pensions removed for very high earners they may be less committed to providing good pension arrangements for their staff."
