Providers have criticised the government's decision to slash the money purchase annual allowance to £4,000, with many saying it goes against the spirit of pension freedoms.
The money purchase annual allowance (MPAA) applies to people aged 55 plus who have begun to draw down on their pension.
Currently such people are permitted to contribute £10,000 a year to their pension tax free.
In the Autumn Statement today (23 November), chancellor Philip Hammond announced from April 2017 this allowance would be reduced by 60 per cent to £4,000 a year.
Gregg McClymont, former shadow pensions minister and head of retirement savings at Aberdeen Asset Management, said the move went against pension freedoms.
It was in the 2014 Budget that Mr Hammond's predecessor George Osborne announced pension freedoms to start in the 2015 to 2016 tax year.
Pensions freedoms allowed anyone aged 55 plus to take the whole amount of their retirement savings as a lump sum, paying no tax on the first 25 per cent and the rest taxed as if it were a salary at their income tax rate.
Mr McClymont said: "[It] matters because it affects the tax treatment of what is expected to be a growing segment of society post pensions freedoms and as longevity rises - people who after age of 55 combine work, pensions saving, and pension income drawdown.
"Flexibility was the mantra of pensions freedoms. This measure reduces flexibility."
Flexibility was the mantra of pensions freedoms. This measure reduces flexibility.Gregg McClymontSteve Webb, former pensions minister and director of policy at Royal London, agreed, saying the move would have a "profound impact on their ability to go on working and contributing worthwhile amounts to a pension".
"Starting to draw taxable pension cash becomes even more of a cliff-edge than at present. We should be trying to make combining work and drawing a pension easier not harder.
"We also need to know what will happen for people who have already drawn taxable cash expecting to be able to go on saving £10,000 per year. Any retrospective change would be totally unfair to savers."
Andrew Tully, pensions technical director at Retirement Advantage, said the move put a "significant limit" on pension freedoms.
"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," he said.
Martin Tilley director of technical services at Dentons Pension Management, described the move as an "unnecessary tweak".
"The number of booklets and information and education documents/websites that will now have to be rewritten will likely cost more to the industry than any gain in revenue to the Treasury,” he said.
Sara Wilson, head of platform proposition at Alliance Trust Savings, said the cut to the 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."
She added she was pleased the government had decided to consult the industry before implementing the move.
james.fernyhough@ft.com
