David Thompson, managing director of business development and proposition at AXA Wealth, has joined the chorus of leading figures expressing concerns about a pension-Isa merger.

Tisa, the tax incentivised savings association, recently warned that a pension-Isa hybrid could undermine workplace retirement savings schemes. It believes the attractions of a pension Isa would encourage people to switch to a pension Isa but take out too much of their money too early because income would be untaxed.

Aviva recently published an employer survey expressing concerns that changes to pension tax relief would damage workplace savings. Aviva said and Isa-style system could cut workplace contributions.

Mr Thompson said the government should beware of the pitfalls in introducing a pension Isa would could encourage people to switch to a new scheme in the hope of taking more of their retirement money early as tax would be removed.

He said: "We’ve warned about the potential downfalls of ISA styled tax relief for pensions since the government’s Green Paper was first announced in the Summer Budget. While I’m pleased to see some reports are suggesting that even the government is now beginning to question this, it’s concerning that there are still some people advocating the move.

"Isas and pensions are likely to be the first, and often only, saving and investment products most people in the UK have. Both have their place in a financial plan and their different features make them suitable for different people at different times.

He added: “But the tax treatment of pensions at the moment is far more complicated than Isa. With a pension you get tax relief upfront. But for a lot of people that’s industry jargon and they don’t know what it means for them in real terms. Or why it matters. Even though, without it, pension pots could be significantly smaller. With longevity, that’s the last thing you need when that pot could be needed for, say 40 years.

“ISAs investing in cash can be ideal for short to medium term investing, but it’s a different mind-set, motivation and investment strategy for the longer term landscape of pensions. The breadth of investment choice for pensions gives people more options to drive growth and protect them against market movements - and we've seen plenty of those recently.

“We don’t need to overhaul the system we have; just simplify it. One way to do this might be to have a flat rate of tax relief for all, along with an industry effort to help people understand the benefits of different tax regimes, different investment types and how an adviser can help them make the most of them.”