Work and Pensions select committee member Steve McCabe has proposed reforms linking pensions tax relief to age and income, in a move that he said would promote inter-generational fairness.
Mr McCabe, who is the Labour MP for Birmingham, Selly Oak, said there was a "pension time bomb" waiting to go off if action was not taken to shift tax relief to those who most needed it.
He told FTAdviser that the proposal, initially floated at a fringe event at the Labour Party Conference in Liverpool on Monday (26 September), would address an urgent need.
"Unless we want to reach a stage in 50 years where we have a generation who don't have pension provisions, and another generation that has no way to pay for them, then we're going to have to address the issue. We have a pension time bomb," he said.
Mr McCabe said he had not gone into the finer details of how such a policy would operate, and had brought it up "only fleetingly" with the other members of the Work and Pensions committee.
However, he said he expects inter-generational fairness to be a key issue for the committee over the coming year.
Earlier this month Hargreaves Lansdown floated the idea of linking pension tax relief to age. The proposal, put forward by head of retirement policy Tom McPhail, would see pension contributions granted government top-ups of 100 per cent of the contribution, minus the saver's age.
That would mean a 26-year-old making a contribution of £10 would receive a government bonus of £7.40, while a 50-year-old would receive £5 (or 33 per cent).
Mr McCabe said he was not aware of this policy, but would have a look at it. However, he pointed out that it only dealt with age, whereas he wanted to include income as well.
He described the policy as an "opportunity for [shadow chancellor] John McDonnell" to do some income redistribution.
Mr McPhail, however, told FTAdviser that, while linking tax relief to age was workable, linking it to income was not.
"As soon as you start having a link to earnings, it gets complicated again," he said.
