UK - The National Association of Pension Funds (NAPF) has called for radical reductions to the amount UK workers can pay in tax-free pension contributions.

Suggestions to lower the tax-free threshold from £225,000 to £50,000 in annual contributions were made last week ahead of this week's emergency Budget, the first by the new coalition government.

The NAPF's chief executive Joanne Segars called for the changes to be implemented instead of the new pension tax relief system or risk "weakening" workplace pensions.

The NAPF said the reforms implemented under the Finance Act 2010 introduced "uncertainty and confusion" for individual savers, as well as potentially costing £3bn to implement.

Under the changes, high-income earners in the 50% tax bracket would only receive tax relief of 20 pence per £1 contributed, in line with the basic tax rather than the 50% tax rate.

Segars said: "The move would ensnare many others beyond the high earners being targeted and would weaken the approach to workplace pensions."

The NAPF argued that while it did not have access to all the relevant data, it believed the £3bn the government hoped to gain under the Finance Act could also be made with the lower tax-free threshold.

Further, she called for the government to issue more long-dated and index-linked gilts to help pension funds manage risk, saying it was a "win-win-win solution" for employers, pension schemes and the government.

"Skewing issuance toward longer maturities would provide the government with a cheap and secure source of finance at a time of exceptionally large public-sector deficits," she said.

Separately, the organisation welcomed the decision to establish a commission on public-sector pensions, which is to be chaired by former Work & Pensions minister John Hutton.