Tax breaks on pensions should be scrapped altogether by the government in favour of a single "lifetime ISA", a think-tank has claimed.
Michael Johnson, research fellow at the Centre for Policy Studies, has criticised chancellor George Osborne's new ISAs (NISAs) for not going far enough to help Britons save.
Johnson claims the current pension saving incentives are an "ineffective and inequitable use of Treasury funds", despite costing £54 billion in 2013.
Instead he has called for government to merge the cash NISA, stocks and shares NISA and junior NISA into a single product assigned to each new baby as their names are registered. For every £1 saved into the lifetime ISA - with a proposed limit of £8,000 - the government could contribute 50p, completely replacing the current pensions tax relief regime.
Johnson says: "The lifetime ISA would provide a degree of ready access to savings while simultaneously justifying the Treasury incentive, which demands a term commitment to savings.
"Withdrawals pre-60 would be limited to original contributions... provided that 50p were first repaid to the Treasury per £1 withdrawn. Post-60 withdrawals would be taxed at the saver's marginal rate of income tax."
Although he accepts that this would hit the highest earners hardest, Johnson proposes scrapping the lifetime allowance, reinstating the 10p tax rebate on pension assets' dividend income and allowing savers to give unused pension pot assets to third parties free of inheritance tax, provided the assets remain in a pension.