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George Osborne has ditched an overhaul of pension tax after a revolt from Tory MPs risked derailing his leadership hopes.

The Chancellor had been considering plans to scrap the system of pension tax relief allowing him to make savings from the £21 billion it costs each year.

However, Mr Osborne has ditched the proposals after being warned that the raid on higher earners could provoke a revolt among his own MPs.

It is the latest big decision to be delayed or dropped before the EU referendum.

A poll in the Times of Tory members this week indicated that Boris Johnson was holding a big lead in the race to succeed David Cameron , suggesting the pension plan had already damaged Mr Osborne’s popularity.

(Image: PA)

Mr Osborne also faced embarrassment after Baroness Altmann, the pensions minister, made clear that she was opposed to the idea of a so-called pension Isa which would have probably brought an end to all upfront tax breaks for savers.

An ally of the Chancellor said: “George has always been clear he wouldn’t do anything to damage saving.

READ MORE: Budget 2016 pensions plans 'will force young Brits to pick up the tab'

“The pensions consultation has been open-ended, to look at how the system is working.

“He’s listened to what people have said and concluded that now isn’t the right time, with uncertainty in the global economy and reforms such as auto-enrolment still bedding in, to turn things on their head.

“It is also clear that employers wouldn’t welcome a wholesale change in the way they administer schemes.

“So he is not going to tear up the system of pension tax relief. There won’t be any changes to tax relief at all in the Budget.”