Rachel Reeves could slash the the tax-free lump sum savers can currently take from their pension by almost two thirds, it emerged last night.

At the moment, most savers can take 25 per cent of their pension pot tax-free once they reach the age of 55, up to a maximum of £268,275.

But Treasury officials are weighing up the impact of reducing this limit to just £100,000.

The Institute for Fiscal Studies has estimated that the move could impact up to one in five retirees.

The £268,275 figure is 25 per cent of the £1.073 million allowance, which used to be the maximum someone could build up in their pension pot without paying extra tax until the previous government scrapped it in April. 

The move, first reported in the Telegraph, could be seen as a further example of Labour’s war on pensioners.

Steven Cameron, of the pension company Aegon, said: ‘Many individuals will have planned their retirement finances on the assumption they could take 25 per cent of their full fund as a tax-free lump sum. Being stopped from doing so would cause a major outcry.’

Earlier this week the Chancellor relented on plans to reduce the 40 per cent pension tax relief for higher earners amid concerns it would unfairly hit those working for the public sector.

A Government spokesman said: ‘We do not comment on speculation around tax changes outside of fiscal events.’