George Osborne opened up the possibility of such changes in the summer Budget and according to research published last week by PWC, 40% of working adults would be in favour – preferring this model over the current system. 

A green paper was launched after the Budget to give “careful consideration” to this idea.

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Mr Loney said: “Since launching the review last month there has been much speculation about changing the current system, where pension contributions receive tax relief, to one where contributions are made from taxed income, but are paid tax free on withdrawal.

“This so called 'ISA-style' tax treatment of pension contributions is a fundamental and far-reaching change to the principles of pension savings, which could pose considerable risk to the Government's aim of creating a savings culture in the UK.

“There is no evidence that the promise of tax free income, 25-30 years into the future, would be believed by the public given the volume of changes to the pensions system over the last 25 years.

“Consequently, there is a real risk of a significant fall in savings, which are already too low in the UK.”

Mr Loney said the move would also create “a parallel system which is wholly incompatible with people's existing pension arrangements”.

He believes it would take years to develop and would increase the overall cost of pensions.

He said: “We believe that it is vital to reform the current tax relief system to make long term saving fiscally neutral for all. “The incentives need to focus on those with lower incomes, to create a more realistic and lower risk way forward. This could also enable the abolition of the lifetime allowance."