It contrasts with the current system, where higher rate tax payers enjoy 40 per cent tax relief on their pension contributions while only 25 per cent of income they withdraw in their retirement is tax free. The remaining two thirds is taxed at the pensioner’s marginal rate, which for most is 20 per cent. Experts said that the higher levels of tax relief on pension contributions under the present system would outweigh the benefit of tax-free withdrawals under the new scheme.