The Chancellor of the Exchequer, Alistair Darling, has announced that restrictions on the tax relief on pensions, which previously included people earning £150,000 or more a year, have been extended to include people earning £130,000 or over.

Fears have been raised that the further restriction announced in the Pre-Budget Report 2009, could reduce employer motivation to provide good quality pension schemes.

"The Government seems to be dismissing the notion that taking higher earners out of workplace pension provision will have dire consequences for employer motivation to provide quality pensions to the rest of the workforce," argued Marc Hommel, partner and pensions leader at PricewaterhouseCoopers (PwC).

"In the weeks following last April's Budget, over three-quarters of employers said that the Government's pension tax proposal for higher earners was further reducing companies' motivation to provide wider workplace pensions, and this has been since borne out in practice by the weekly announcements of closure of existing quality pension schemes."

Hommel believes that the Pre-Budget's extension to the boundaries for people falling under the higher-rate tax restrictions, on top of the associated administrative complexity, will result in further acceleration of the current raft of pension scheme closures.

Robin Hames, head of technical, marketing and research at Bluefin Corporate Consulting, has also expressed his disappointment with the Chancellor.

"A little over six months ago, the Government broke one of the fundamental principles of pension tax relief, namely that pensions are deferred pay and contributions are relieved accordingly. Now at the first opportunity, the Chancellor has drawn more people into the net. This can only further undermine faith in the system and turn more key decision makers off pensions. It seems inevitable that this will have a knock-on effect on the value placed on providing pensions for employees in general.

"It seems simplification has been well and truly consigned to history," he added.

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