The negative effects of the government’s annual allowance taper will not just be felt by the public sector and groups most vocal about it such as doctors and NHS consultants, says AJ Bell.
The group says private sector workers are also feeling the pinch of the unpopular tax taper which effects around 300,000 people.
AJ Bell senior analyst Tom Selby says the complexity of the policy is specifically restricting these workers who are classed as Generation X.
These people have already missed out on a number of changes to the pensions system that could have benefited them significantly, he adds.
Selby says: “The vast majority of people hit by the taper will be in the forgotten generation of people in their forties and fifties who missed out on the glory years of defined benefits and for who automatic enrolment has arrived too late.
“Many will have little or no pension provision at all from their earlier careers, possibly because their wages were lower, their employer didn’t offer a scheme, or they prioritised buying a house and raising a family.”
He adds the taper is acting “as a monumental break” for people in that age bracket looking to make up time on their savings.
The AA taper currently depends on individuals’ adjusted income and threshold income, which is total taxable income and any salary sacrifice arrangement set up since 9 July 2015, less personal contributions.
AA is reduced by a pound for every two pounds of adjusted income above £150,000 if a persons threshold income is above £110,000.
AJ Bells says Generation X are also limited in their ability to work out how much the AA taper effects them annually, given how it is calculated.
Selby says: “It cannot be right that someone who has delayed saving until their 40th birthday risks having their retirement aspirations constrained to a private pension income worth less than two-third of the average UK salary.
“The taper is causing untold damage to people’s understanding, confidence and trust in pensions.
“The government must scrap the taper and consider whether the overall pension tax system is really fit for purpose.”