The money purchase annual allowance will be cut to £4,000 in April 2017, down from the current £10,000, chancellor Philip Hammond has announced.
In his first Autumn Statement today (23 November), Mr Hammond also announced changes to the tax treatment of foreign pensions, and cuts to tax relief through salary sacrifice schemes.
Mr Hammond also committed to keeping the triple lock in the state pension until 2020, as well as confirming a pre-announced ban on cold calling on pensions.
Explaining the decision to change the money purchase annual allowance, the Autumn Statement document stated: "The government does not consider that earners aged 55 and over should be able to enjoy double pension tax relief, such as relief on recycled pension savings, but does wish to offer scope for those who have needed to access their savings to subsequently rebuild them."
On the triple lock, Mr Hammond committed retaining the measure to 2020, but not beyond.
“As we look ahead to the next parliament we will need to ensure that we tackle the challenges of rising longevity and fiscal sustainability.
"And so the government will review public spending priorities and other commitments for the next parliament in light of the evolving fiscal position at the next spending review,” he said.
On changes to tax breaks on salary sacrifice, which Mr Hammond described as "unfair", he said:
"From April 2017, employers and employees who use these schemes will pay the same taxes as everyone else."
However, he added that pensions, ultra-low emission cars, childcare, and the cycle-to-work schemes would be excluded from this change, adding "certain long term arrangements will be protected until April 2021”.
On foreign pensions, the chancellor announced that their tax treatment would be "more closely aligned with the UK’s domestic pension tax regime by bringing foreign pensions and lump sums fully into tax for UK residents, to the same extent as domestic ones".
That would extend from 5 to 10 years the taxing rights over recently emigrated non-UK residents’ foreign lump sum payments from funds that have had UK tax relief, align the tax treatment of funds transferred between registered pension schemes, and update the eligibility criteria for foreign schemes to qualify as overseas pensions schemes for tax purposes.