Budget 2016: what can we expect for pensions?

When it comes to pensions, the Budget is set to be far less radical than George Osborne had hoped - but with the EU referendum coming up, it's not the best time to be alienating voters.

His original plans were known to include cutting tax relief for higher-earning pension savers by introducing a flat rate of between 25% and 33%, or a pensions ISA with a lower rate of tax relief on contributions that would pay out tax free.

He was also believed to be considering taxing payments into pensions rather than, as at present, taxing withdrawals during retirement instead.

However, fellow Tory MPs expressed extreme concern that yet another shake-up would destroy people's ability to plan for the future and potentially be both destabilising and unpopular. Earlier this month, the plans were dropped.

This doesn't though, mean that there won't be changes in the Budget.

While the annual allowance, the amount people can pay into a pension each year, is currently set at £40,000, this is likely to fall. Many experts are suggesting a new figure of £25,000, but the Centre for Policy Studies has recommended £10,000.

Alongside this, there will probably be further changes to the tax reliefs for high earners.

The amount below which pension savers are able to claim tax relief is currently capped at £40,000, but is already set to fall gradually to £10,000 for those making between £150,000 and £210,000 a year.

It's possible that Osborne will expand on these plans, either by extending them to people on lower incomes or by changing how much unused allowance people are able to carry forward from previous years.

Changes to the lifetime limit are already set to come in next month. Currently, savers can hold as much as £1.25 million in a pension before a 55% penalty tax charge comes in. This is due to fall to £1 million, and Osborne is unlikely to cut it any further now.

There's also been a lot of discussion in recent weeks over salary sacrifice schemes, which allow employees to give up part of their salary, pre-tax, for some sort of benefit - and nearly 70% of employers do this for pension contributions. This, clearly, lowers the tax take, and the system may be tightened up.