Wealthy savers should not be eligible for the higher-rate tax relief on pensions, according to Danny Alexander.

The chief secretary to the Treasury has called for tax relief on pensions to be halved from 40 per cent to 20 per cent in next month's budget as the government can simply no longer afford to supplement retirement savings to such a large extent. 

Mr Alexander claims that the move would save more than £7 billion and promote equality in a system which he claims is disproportionately helping the wealthy.

In an interview with the Daily Telegraph, Mr Alexander said: "If you look at the amount of money that we spend on pensions tax relief, which is very significant, the majority of that money goes to paying tax relief at the higher rate."

Under the current rules, for every 60p which is saved in a pension by a higher-rate taxpayer, the government contributes 40p in tax relief to round it up to £1.

However, the government's contribution for those who pay the 40p higher rate of tax would fall to 20p if the new proposals are formally announced in March.