Chancellor Rachel Reeves is said to be mulling a cut to the amount savers can take from their pensions without paying tax ahead of this month’s Budget.
Plans are being considered to reduce the amount that can be withdrawn tax-free to £100,000, according to The Telegraph.
This would be down from £268,275 currently, with savers able to withdraw 25% of their pensions up to the limit once over the age of 55.
One of the country's leading pension funds has reportedly been asked to assess the impact of reducing the limit.
Think tanks the Institute for Fiscal Studies (IFS) and the Fabian Society have previously argued the higher limit favours wealthier people.
Such a move would be part of efforts to raise an additional £2 billion through the Budget, after the government said the UK faces a £22 billion “black hole” in public finances.
The current limit reflects 25% of the £1.073 million allowance pensions used to be able to save tax-free before the scheme was scrapped by the former government earlier this year.
“It is hard to justify continuing to subsidise extra saving for individuals with pension wealth little short of £1.073 million,” the IFS said in a report last month.
However, critics argued the move could cause an outcry, given many would have planned their retirement finances on the basis of being able to withdraw the funds tax-free.