The cap on the lifetime allowance for pension savers penalises good investment and serves as a barrier to savings, Skandia has argued.
Calling for the cap to be abolished, Skandia points out that there is already a limit to how much someone can pay into their pension every year.
According to the company, if someone starts saving at 25, and invests £509 gross per month, their pension savings could breach the current lifetime allowance of £1.5m by the time they reach retirement. This figure assumes contributions will grow by 3 per cent per year, and a 7 per cent investment growth rate.
If growth is higher due to better than expected investment, the investor could breach the allowance and be penalised 55 per cent on anything over the £1.5m limit.
Adrian Walker, pension expert at Skandia, said: “The current annual allowance, set at £50,000, controls the amount of tax relief the government is prepared to give on pension savings. With this control in place, it is hard to see the rationale there is for a lifetime allowance.
“The lifetime allowance effectively caps good investment performance and will penalise those who have managed their investments well.
“Young people are being told to take responsibility for their future and start saving early towards retirement. If someone is successful in their career, and they are prudent in their savings, this cap is clearly going to penalise them.
“At a time when the government should be doing more to attract people towards saving for their retirement, they should look to remove barriers which could act as a detriment.”