Britain is on “pensions strike” as savers fear government moves to restrict tax relief for high earners will be the thin end of the wedge.

A survey of 3,000 people for the Association of British Insurers (ABI), seen exclusively by The Sunday Times, shows that 31% think the government will further reduce tax relief on pension contributions — and financial advisers report that savers are increasingly shunning retirement schemes.

Peter Hargreaves at Hargreaves Lansdown, the adviser, said: “Although pensions remain the best way to save for retirement, they have been discredited by a meddling government. The result is a pensions strike. People who should be saving are afraid to do so.”

Pension contributions are already plummeting. One-off pension payments totalled £3.44 billion in the first quarter of this year, 26% down on the £4.68 billion saved the same time last year, ABI figures show. Employer-sponsored stakeholder pensions saw the largest drop in contributions — down 38% to £87m.

Alistair Darling’s controversial move to cut pensions tax-relief for those earning more than £150,000 from 2011 is being blamed as a key factor in the growing reluctance of consumers and companies to contribute to pensions.

More than three-quarters of the employers surveyed by Price Waterhouse Coopers, the accountant, said changes in the last budget made them less willing to provide good workplace pensions.Here, we outline our pensions manifesto:

Backtrack on tax relief

The government plans to introduce a top-rate tax of 50% from the start of the tax year in April and it will start clawing back tax relief on pension contributions the following year. It has proposed measures to avoid people pumping money into their pension funds in between.

This “anti-forestalling” regime will catch out those who contribute more than their “normal” pattern, or £20,000, whichever is the higher. They will be hit with a special tax charge of 20%, rising to a flat 30% in 2010-11.

From 2011-12, the charge will be tapered depending on earnings, from nothing for those on £150,000, to 30% for those earning £180,000 or more.

Suppose someone earning £250,000 has had 10% of gross salary paid into a company pension scheme every month for some time — so £2,083 a month, or £25,000 a year. They would not be caught out by the new rules, even though they are above the £20,000 limit, as their payments are regular (deemed to be monthly or quarterly). However, an accountant who made a profit of £250,000 from his partnership, and put 10% into their pension — £25,000, as in the above example — would be caught out because it is a lump-sum.

“We see no reason why they should be subject to additional tax because of the timing of their contributions,” said Beverley Lavin at Brewin Dolphin, the financial services firm.Those who pay annual bonuses into their pensions will also be hit, as will people who want to invest in commercial property within their self-invested personal pension (Sipp). Unless they have enough cash in their fund, they will have to invest new money — likely to exceed the £20,000 limit.

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