Chancellor George Osborne has reportedly axed plans to overhaul pension tax relief as part of the upcoming Budget.
Osborne had promised to examine a potential overhaul of the system as part of his July 2015 Budget, with options including a move to a flat-rate system, or a more dramatic overhaul to convert the system and bring it into line with the tax treatment of Isas by taxing contributions.
However, just over a week before the Chancellor was expected to announce a response to the consultation at his 2016 Budget, the plans have reportedly been dropped.
According to the BBC, Treasury officials have decided that now is “not the right time” for reform.
The decision comes after Prime Minister David Cameron reportedly warned the Chancellor to exercise caution in his approach to the reforms, in light of opposition from the Conservative backbenches and the approaching European referendum.
The Treasury could not be reached for comment.
AJ Bell estimates the consultation has cost the Treasury massively, with savers clamouring to put money into their pensions under the current rules ahead of an anticipated clampdown.
Chief executive Andy Bell says the plans “backfired spectacularly”, costing the Treasury £1.5bn in additional tax relief.
He says: “Far from saving money, the uncertainty created by the consultation and scare stories from former ministers has led to a surge in pension contributions and there will be a heavy cost to this for the Treasury.
“This reaffirms my long held view that trusting politicians to make significant policy decisions on pension tax relief is like trusting a troop of foxes to babysit a brood of chickens.
“The pension saving public would be better served by an independent Pension Commission with a mandate to manage UK pension policy and provide certainty and confidence to savers.”