Senior ministers are reportedly considering scrapping tax relief for better-off people's pension payments.

A number of Sunday newspapers suggest that the Treasury has floated the idea of ending the 40% tax relief on pension payments for higher-rate tax payers.

However a spokeswoman for the Treasury insisted: "This is news to us. No such proposal is being considered by Treasury ministers, let alone agreed."

The Sunday Times says the plan will be announced in a government green paper in November.

At present payments into pension funds are tax-free - which means the state effectively contributes 22p for every 78p invested by a standard rate taxpayer, and 40p for every 60p invested by a higher rate taxpayer.

'More equitable'

Nearly three million people receive the higher rate of tax relief, with one No 10 adviser on pensions reporting that a quarter of all money spent on tax relief goes to the richest 2.5% of the population.

The Sunday Telegraph quotes one minister as saying incentives to invest in pensions should be "more equitable".

"There are huge incentives for the richer people but the incentives are much less attractive for those on the margins, who are exactly the ones we need to be encouraging to take out pensions," the minister said.

The Sunday Times quotes Paula Diggle, head of pensions and savings at the Inland Revenue, as saying the current tax breaks were "unsustainable".

The newspaper says that the plans are being drawn up by Tony Blair's Forward Strategy Unit, the Treasury, the Department for Work and Pensions and the Inland Revenue.

It says ministers are frustrated that not enough people are saving for retirement despite tax breaks worth more than �14bn a year.

The newspaper says the proposal is for the government to subsidise pension contributions on a sliding scale, contributing �1 for every �1 invested up to �500, but with the incentive declining as the contributions grow.