It was one of a raft of measures the Chancellor outlined to cut down on what he called “aggressive tax planning.” The move to reduce Money Purchase Annual Allowance (MPAA) has already drawn criticism from financial professionals.

Sara Wilson, head of platform proposition at Alliance Trust Savings, believes the reduction in the Money Purchase Annual Allowance for pensions in drawdown may present challenges for some.

She said: “The planned reduction from £10,000 to £4,000 in the Money Purchase Annual Allowance could limit the ability of those still in work and – for good reason - drawing down pension funds (for example to fund a divorce or manage a gradual wind down to full retirement) to rebuild their pots in the longer term. So we are pleased to see the Government plans to consult on this particular issue.”

Andrew Tully, pensions technical director at Retirement Advantage, said: “The wide scale pension changes introduced from April 2015 were designed to give people much more freedom over how and when they can withdraw their pension pot. This restriction to the Money Purchase Annual Allowance is a significant restriction to that freedom.

“People will need to carefully consider before they take benefits if there is a possibility they or their employer may want to make future pension contributions above a relatively low limit of £4,000 a year. However people’s circumstances change so it isn’t always possible to know what the future may hold, and this change greatly restricts that ability to alter plans as you move through retirement.’

The change is one of a number of tax measures the Chancellor outlined as he promised to tackle “aggressive tax planning” strategies. The MPAA means that once a person has accessed pension savings flexibly, if they wish to make any further contributions to a defined contribution pension, tax-relieved contributions are restricted to a special money purchase annual allowance.

The move would reduce the MPAA from £10,000 currently to £4,000, reducing the benefit to working over-55s from withdrawing pension money and then reinvesting or recycling it into in the same pension scheme to gain double pensions tax relief.

The Treasury says it will consult on the change until February, leaving the door open to amendment. The changes are detailed in a 15 page Treasury consultation paper published today called: Reducing the money purchase annual allowance.

The paper says: “The government believes that an allowance of £4,000 is fair and reasonable and should allow people who need to access their pension savings to rebuild them if they subsequently have opportunity to do so. Importantly, however, it limits the extent to which pension savings can be recycled to take advantage of tax relief, which is not within the spirit of the pension tax system. The government does not consider that earners aged 55+ should be able to enjoy double pension tax relief i.e. relief on recycled pension savings.”

In his Autumn Statement speech to the Commons today Mr Hammond said: “The government is committed to tackling tax evasion, avoidance and aggressive tax planning, and the UK tax gap is now one of the lowest in the world. But we must constantly be alert to new threats to our tax base – and be willing to move swiftly to counter them.

“…For pensions that have been drawn-down, I will also reduce to £4,000 the Money Purchase Annual Allowance, to prevent inappropriate double tax relief.”

In other moves to cut down on “aggressive tax planning,” Mr Hammond said: “At the Budget we committed to removing the tax benefits of disguised earnings for employees, and I am now going to do the same for the self-employed and employers, raising a further £630 million over the forecast period.

“We will shut down inappropriate use of the VAT flat rate scheme that was put in place to help small businesses; we will abolish the tax advantages linked to Employee Shareholder Status in response to evidence it is primarily being used for tax-planning purposes by high-earning individuals and we will introduce a new penalty for those who enable the use of a tax avoidance scheme that HMRC later challenges and defeats.”

He said these measures – and others set out in the Autumn Statement document – would raise around £2 billion over the forecast period.

• The tax treatment of foreign pensions (including QROPS schemes) will be more closely aligned with the UK’s domestic pension tax regime in future, says the Treasury, by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones. The government will also close specialist pension schemes for those employed abroad (“section 615” schemes) to new saving, extend from 5 to 10 years the taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief, align the tax treatment of funds transferred between registered pension schemes, and update the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes. (28)