Senior figures in the pensions industry, including Mercer, one of the world's largest investment consultants, have welcomed the Treasury's proposal issued yesterday to restrict higher-rate tax relief on pension contributions.

A discussion paper published by the Treasury yesterday suggested an annual allowance of £30,000 (€35,990) to £45,000 for tax-free pension contributions - down from the current level of £255,000 a year. It also suggests capping tax relief at 40%, further reducing the relief available to taxpayers paying the 50% rate.