Over one million workers are at risk of breaching the pensions lifetime allowance limit, triggering hefty taxes, research from the mutual insurer Royal London shows.
According to the research, just under 300,000 non-retired people already have pension pots worth more than the current £1.03 million lifetime allowance limit. An estimated 1.25 million more workers are expected to join them by the time they retire.
Exceeding the lifetime allowance results in heavy tax charges when accessing your pension. Pensioners are currently changed up to 55% of their pension for any amount that exceeds the £1.03m limit.
Senior public servants such as head teachers, senior officers in the local council, senior civil servants, as well as senior NHS staff and police officers are likely to be affected"
People receiving a decent wage and a relatively generous pension are likely to be affected, said Sir Steve Webb, a former pensions minister who is now director of policy at Royal London.
"Senior public servants such as head teachers, senior officers in the local council, senior civil servants, as well as senior NHS staff and police officers are likely to be affected," he said.
"The other set of people are those working in the private sector with a good wage, so earning £60,000 to £90,000 a year."
"This research shows, for the first time, how the drastic cuts in the Lifetime Allowance mean that large numbers of workers will now be caught by a limit that was originally only designed for the super-rich.
"It is shocking that over a quarter of a million people have already breached the LTA and that many of these are still adding to their pensions.
"They are likely to get a nasty shock - and a big tax bill - when they do finally draw their pensions."
Royal London pointed out that one of the reasons why so many people are on course to exceed the LTA is because the government increases it each year in line with consumer price inflation (CPI).
By contrast, wages tend to grow faster than inflation and the money invested in pension pots is likely to grow faster than inflation over the long-term. This means hundreds of thousands of workers will get caught out by the limit - many of whom would not regard themselves as wealthy.
The lifetime allowance has been controversial since its introduction in 2006 by former chancellor Gordon Brown. When first introduced, the limit was placed at £1.8 million. However, from 2010, the amount was steady reduced, reaching £1.03m in 2016.