The annual pensions allowance could limit high earners from making significant contributions to their pension pots.

Financial advisor Salisbury House Wealth said the number of people earning above £250,000 per annum has increased over the last five years.

According to the organisation, there were 40,700 people aged 50-59 earning £250,000-plus per annum in 2013/14 – up 16% on 2009/10 when the number was 35,200.

However, those looking to use the additional income to boost their pensions could be disappointed because the allowance limit the amount they can contribute.

Tim Holmes, managing director at Salisbury House Wealth, said: "Older workers are finding that time and the pension tax rules are not on their side."

"Just as workers in their 50s are starting to earn the sort of income that allows them to invest significant sums of capital into their pensions, they have to be careful not to exceed the annual pensions allowance or they will effectively end up paying tax twice."

"For workers who have spent decades climbing the career ladder, paying off the mortgage, and raising a family, the annual pensions allowance limit comes as a real blow."

The annual allowance caps the amount individuals can contribute to their pension tax-free to £40,000 per year, reduced from £50,000 in 2014/15 and down from £255,000 in 2010/11.

New rules introduced in April 2016 mean that tax relief also tapers off for income above £150,000 per annum, meaning that anyone earning over £210,000 has their annual allowance capped at £10,000.

"While it's true that retirement planning needs to start young, it's often only when people are older that they have accumulated sufficient resources and reduced their other outgoings to be able to make a real difference to their pension pots," said Holmes.

Salisbury House Wealth added that workers in their 40s were the only other pre-retirement age bracket to see an increase in those earning £250,000 or more - up by 4% from 50,100 in 2009/10 to 52,300 in 2013/14.

"For higher earners in their thirties and forties, it's essential to plan ahead as much as possible to ensure that they can save sufficiently for their retirement in the most tax-efficient way."

"They may feel that they've got plenty of time to bump up contributions when they are older and many other responsibilities to consider first, but it may not turn out to be as easy to make that strategy work as they might think."

First published 05.05.2017

Lindsay.sharman@wilmingtonplc.com