Philip Hammond, who is due to deliver the Budget at 3.30pm today (October 29), is widely expected to announce a reduction in the pensions annual allowance from £40,000 to £30,000 or £20,000.
"Often seen as a soft target by HM Treasury, pensions could play a starring role in funding the black hole left by the government's pledge to help the NHS," said Austin Broad, group head of advice at AFH Wealth Management.
"A complete overhaul, like chopping pension tax relief altogether, would be way too bold given Brexit uncertainty and the political fallout of yet another U-turn.
"However, cutting higher-rate relief and tinkering with the annual and lifetime allowances is firmly on the agenda."
But Mr Broad has warned any cuts or increased complexity, "risk sending the wrong signal, scaring savers".
Tom Selby, senior analyst at AJ Bell, said a pension annual allowance cut would risk a backlash among public sector workers.
“While very few private sector workers would be constrained by a £20,000 yearly allowance, hundreds of thousands of public sector staff would likely be caught,” he said.
“Cutting the annual allowance could undoubtedly raise valuable short-term revenue to help fill the £20bn NHS funding gap.
“In doing so, however, he would risk a backlash from trade unions across the public sector – including, ironically, those representing senior NHS employees,” Mr Selby added.
There have been reports the chancellor will announce changes, which would mean retirement pots could invest in high-growth UK technology companies – or 'patient capital' investments.
Steven Cameron, pensions director at Aegon, said: "The government seems keen to use pension schemes as a source of 'patient capital' investment to help innovative firms secure long-term investment.
"Patient capital investment offers the potential for high returns for those prepared to take a risk with newer, innovating companies and who are prepared to invest for the longer term."
He said: "While an element of capital investment may be worth considering in some schemes, this must be part of a diversified approach and should be for trustees and scheme providers to consider, with no mandatory requirement.
"The key aim of pension schemes must remain providing an income in retirement to their members, not as a compulsory flow of investments to finance parts of our economy."
It has been assumed the chancellor has little room to manoeuvre in this Budget, given the government's NHS funding commitment and the costs of the UK's looming departure from the European Union.
It remains to be seen whether Mr Hammond will be able to announce any further developments with regards to Brexit negotiations when he stands up to deliver his Budget later today, or how much more he has set aside to spend on Brexit.
But Hetal Mehta, senior European economist at Legal & General Investment Management, observed Mr Hammond has more "wiggle room" than previously believed.
She said: "From looking at the latest UK budget deficit numbers, it would appear that 'Spreadsheet Phil' does indeed have some wiggle room.
"The deficit has been closing ever since 2010, with most recent data showing a much narrower deficit than the market had expected. In addition, total government debt relative to GDP has begun to edge lower.
"So will Phillip Hammond spend more?" asks Ms Mehta.
"Possibly a little, in our view, but probably not so much that he fails to keep the majority of his powder dry until closer to the next general election (though our best estimate is still 2022, given the Fixed Term Parliament Act) and once there is greater certainty over the financial impact of leaving the European Union."
Also under close scrutiny will be any announcements in relation to tax, Isas and housing.
The much-talked-about 'Amazon tax' is unlikely to make an appearance in the Budget, according to Tim Bennett, partner at Killik & Co.
"The idea of the UK going it alone and imposing some sort of digital sales tax (the so-called 'Amazon tax') seems unlikely with Brexit looming – the last thing UK business needs right now is for the government to mark out Britain as uniquely anti-global and anti-tech. Such a move would represent a spectacular own-goal," Mr Bennett said.
"A similar point can be made around rumours that Mr Hammond may target the various tax breaks available to entrepreneurs and small businesses – regardless of the underlying political pressures, now is surely not the right time to make the UK less attractive to business talent."
While there have been calls for the government to abolish the Lifetime Isa, and simplify the Isa range once more, Clare Francis, director of savings and investments at Barclays Smart Investor, predicted, "given everything else on the political agenda at the moment, we think it's unlikely although it may be something that’s looked at in the future".
Click here and join us at 3pm today for our live coverage of Budget 2018 - you can read all the big announcements here first and put your questions to our panel of experts.
Marcus Brookes, head of multi-manager at Schroders, David Inglesfield, head of wealth at KW Wealth, and Andrew Gilbert, head of retirement at LV, will be on hand to answer questions and make sense of Mr Hammond's announcements for financial advisers.
eleanor.duncan@ft.com
