In a speech at the Turcan Connell conference in Edinburgh yesterday, Matthews called on the Government to review its position on means-testing and be more lenient.
He said: “It simply cannot be right that potentially thousands of people, who can least afford it, use their hard-earned cash to pay into pension accounts, only to find at retirement that their efforts disqualify them from a range of state benefits, and that they would have been better off keeping their money in their pockets instead.”
“This is a scandal just waiting to happen, and it places our industry at potential risk of giving bad advice.”
He added: “The Government’s position has to mellow.”
Matthews also criticised the Budget move to curtail tax relief on large pension contributions.
He said: “It sent out completely the wrong message to pension savers.
“I have said before that tax relief on contributions was a tangible way of all Governments saying to absolutely everyone, ‘saving for your pension is a good thing and we will encourage it’.
“That unwritten contract was so important. It has now been broken for one segment of savers, meaning it can easily be broken for others sometime later.
“It was a poor decision, and unnecessary, as lifetime limits already apply and achieve much the same outcome.”