The Chancellor sent shock waves through the pensions industry earlier in the year when he announced that, for the first time, pension scheme members could in principle take all of their retirement savings as a lump sum with (broadly speaking) 25% still tax free and the balance charged at the member's marginal rate of income tax.  The industry is still getting to grips with that, but there has been speculation that we could be on the verge of another major change.

There has been increasing debate over the past 18 months or so about pensions tax relief, with questions having been raised as to whether it operates fairly and effectively. 

In his speech at the Labour party conference last September, Ed Balls, the Shadow Chancellor, announced that Labour would restrict pensions tax relief "for the very highest earners to the same rate as the average taxpayer".  There has been subsequent discussion as to exactly what that would mean.  A report in the Telegraph of the same date noted that "This could include reforms where every saver would receive tax relief of 30pc or less, regardless of their income.  Previous statements from Mr Balls pointed towards a level of 20pc cap for those earning £150,000 or more.  Party leader Ed Miliband has suggested a 26pc level for all in the past."

That particular baton was picked up by Steve Webb, the Pensions Minister, who was also advocating a flat rate of tax relief (re-iterated at the October 2014 NAPF conference) of somewhere between 20% and 30%.  That has not been official Liberal Democrat policy, which has focused more on cutting the lifetime allowance.  However, the Liberal Democrats have now unveiled the party's "pre-manifesto", which includes a statement that, were the party to be elected in 2015, it would "establish a review to consider the case for, and practical implications of, introducing a single rate of tax relief for pensions, which would be designed to be simpler and fairer and which would be set more generously than the current 20% basic rate relief".

The Conservative policy seems to remain one of restricting pensions tax relief by operation of the existing annual and lifetime allowance mechanisms, but there is of course still time for that to change.  If it does, a question is whether that would be before or after the election, with the industry waiting to hear the Chancellor's autumn statement – which, it has been announced, will be made on 3 December 2014 – with baited breath. 

There must be questions about whether, even if they were to adopt the idea, the Conservatives would make such a change before the election.  Moreover, if they were going to do so, the opportune time to announce it would seem to have been at the same time as when the Chancellor was granting people the freedom to take all their retirement savings as cash.  Nevertheless, given the momentous decision of earlier in the year, nothing can surely now be ruled out.

The statements about reducing pensions tax relief are not isolated political thoughts: there have been a number of "think tank papers" advocating change. 

Last year, the Pensions Policy Institute gave its assessment of tax relief for pension savings in the UK in a report sponsored by Age UK, the Institute and Faculties of Actuaries, Partnership and the TUC.  That report advocated change to the current system and looked at options, include a single rate of tax relief – with thoughts that a rate of around 30% could be a fairer approach – although highlighting that some difficulties would arise.   

The debate has been reignited this year by two papers by Michael Johnson, published by the Centre for Policy Studies, in which he advocates change to the current system of pensions tax relief as part of a wider shake-up of savings in the UK.  Mr Johnson's papers include a proposal to break-down barriers between accessible savings made before retirement on the one hand, and those which are made for, and result in payments accessible in, retirement on the other.

Mr Johnson suggests that the current system of pensions tax relief be abolished and replaced with something much simpler.  He proposes that, rather than tax relief, the Treasury makes a contribution to an individual's retirement savings arrangement of 50p for each £1 that the individual saves (themselves, or by way of contribution from their employer) up to a limit that could be £8,000 – so with the extra money from the Treasury, that would result in £12,000 of savings.

Individuals would be free to save more – up to an annual allowance of £30,000, which would be a limit shared between pension and ISA savings in any proportion that the individual chooses - but any such additional savings would not receive any Treasury contribution or tax relief.  Those savings which benefit from the Treasury's contribution are referred to as "incentivised savings" and those which do not are referred to as "non-incentivised savings".

Mr Johnson proposes that the lifetime allowance be abolished.  

In terms of possible "receiving arrangements", Mr Johnson proposes that, rather than contributions having to be paid into a traditional pension scheme – which would still be available for those individuals who might prefer them - the money could be paid into a new vehicle, which he calls a "lifetime ISA".

The lifetime ISA would combine the traditional features of an ISA with those of a pension scheme.  Subject to certain restrictions, a member could withdraw their money from the lifetime ISA at any time, but would have to repay the 50p per £1 of incentivised savings invested back to the Treasury,on any withdrawal before age 60.  

The proposed restrictions include only being able to withdraw amounts equal to that contributed by the individual before age 60 - or by the individual's employer, unless a member receiving an employer's contribution as cash before retirement proves too unpopular with employers - not any amount representing capital growth.  Also, a waiting period of ten years would apply, before anyincentivised savings made between ages 50 and 60 can be withdrawn.

From age 60 onwards – or from some point between age 60 and 70 for any incentivised savings subject to the waiting period noted above - the individual would be able to take their money without having to repay anything to the Treasury.  Any incentivised savings and any capital growth would be taxed at the individual's marginal rate (there would be no tax charged on non-incentivised savings, which will have been made out of post-tax income and will not have received any Treasury incentive).