Pensions: Measures to incentivise private pension provision have been promised in the upcoming Finance Bill but Mr Cowen concentrated yesterday on restricting tax relief - in particular on higher earners.

As expected, the Minister introduced a lifetime limit on the size of a pension fund that could attract tax relief. The limit - €5 million - was above the level that Mr Cowen had mentioned several times ahead of the Budget and will equate to an annual pension of around €250,000.

The Minister also announced that he would limit the maximum tax-free lump sum a person can draw from their pension fund to €1.25 million.

Both measures, which will be index-linked, were introduced as of yesterday, confounding the pensions industry which had expected such measures to be phased in.

Benefit consultants Watson Wyatt said the Minister's speech was "clearly" directed at limiting the scope of high net worth individuals to avail of pension tax relief. "This is a stick with which to beat a very small number of pension tax abusers," said managing consultant Ray McKenna.

However, he said a separate measure to levy income tax on Approved Retirement Funds (ARFs) as if 3 per cent of the fund was drawn down each year was reasonable "given that the original purpose of ARFs was to facilitate income drawdown as an alternative to annuity purchase".

The Minister expects the pension measures announced to result in savings of €42 million a year to the Exchequer.

Brokers accused the Minister of rolling back some of the flexibility introduced in recent years that had been instrumental in increasing the attraction of pension saving.

"In particular, the taxation of ARFs will force minimum drawdown rates of 3 per cent a year and this will reduce the flexibility pensioners have to manage their income in retirement," said Diarmuid Kelly, chief executive of the Professional Insurance Brokers Association, who called it a "retrograde step".

Ernst & Young tax partner Fred Kerr said, in the light of the recent National Pensions Review, "it is ironic that the Minister of Finance has not offered any tax incentives to pension investors but instead has penalised them".

Aileen O'Donoghue, director of Ibec's Financial Services Ireland, expressed disappointment that no specific initiative on adapting the SSIA model to pensions had been announced.