Plans to cut pensions tax relief to fund an increase in inheritance tax have come under fire from a pensions advisory firm.
The Conservatives said they would "take the family home out of tax for all but the richest" if they win power in May.

This would be done by increasing the effective Inheritance Tax threshold for married couples and civil partners to £1 million.

It would be paid for by reducing the tax relief on pension contributions for people earning more than £150,000.

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Jamie Smith-Thompson, managing director of Portal Financial, is against the proposal.

He said: "Policies such as this send a mixed message from the Government – on the one hand we have seen a number of positive changes, but then there are these announcements that risk reducing the incentive to save early.

"This policy is so ill-thought out that it does not consider the size of the pension fund, so if a high earner has a very small pension they still cannot contribute more than the £10,000 a year."

Tom McPhail, head of pensions research, at Hargreaves Landsown, said: "After all the seismic changes to pension policy in recent years, including Auto-enrolment, the pension freedoms and the impending reform of the state pension, a period of stability would be the best thing any politician could do for pensions.

"The Conservatives are not alone in their plans to change the tax relief rules, it is something Labour, the Liberal Democrats and the SNP have all talked about. Our concern is that any changes of this nature should be part of a considered savings policy."

Chancellor George Osborne told the BBC it was the right thing for his party to do.

He said: "Conservatives support the basic human instinct to provide for your children. And we believe that your home that you've worked for and you've saved for should belong to you and your family, not the tax man.

"So we will take family homes out of inheritance tax, we will effectively increase the inheritance tax threshold to £1m, so that only millionaires pay inheritance tax."

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In order to fund the new IHT allowance, the Conservatives would limit the amount that those earning above £150,000 can contribute to their pensions.

This would be achieved by reducing the annual allowance from £40,000 to £10,000 gradually for those above the additional rate threshold. For every £1 of earnings over £150,000 the annual allowance would reduce by 50p, so that those earning £210,000 and above would have an allowance of £10,000.

Chris Marshall, from pension provider Hornbuckle, said: "The extent to which the constant tweaking of the pensions rules acts as its own disincentive to saving is difficult to measure. "What's certain is that legislative change year after year increases the cost to the pensions industry of complying with the changing rules, and that cost inevitably gets passed onto customers. The impact in most cases will be felt by those with the least in their pensions.

"In their fervour to penalise those who have saved (or could save) more into their pensions, successive governments have thereby risked putting off exactly those who should be saving, and for whose benefit the whole system of tax relief has been conceived."