George Osborne's plans to reform pension taxation by creating so-called pension Isas could cause a "Northern Rock-style run on the pension system" - and may end up costing investors billions of pounds.
The plans are expected to be revealed as part of the chancellor's Budget on 16 March. It is thought they will see the current regime scrapped in favour of a single 20 per cent rate, with free withdrawals.
But Tom McPhail, head of pensions research at the Bristol-based financial group, warned that "any hint of political interference could result in billions of pounds being withdrawn overnight", akin to when thousands of savers rushed to take their cash from Northern Rock as it teetered on the brink of collapse.
"Investors don’t trust politicians not to muck around with the pension system, with good reason," he said, adding the reform would be "hugely unstable".
McPhail said: "The offer of a 20 per cent top up, with tax free withdrawals looks superficially attractive, however any change to pension taxation will involve cuts to the tax relief available. This is likely to be particularly bad news for anyone who becomes a higher rate taxpayer towards the end of their working careers when they are most able to catch up on their pension funding.
"It would mean cutting the annual allowance very substantially, probably down to around £10,000. It would therefore become extremely difficult for mid to high earners to build a decent retirement pot over their working lives."
Higher earners could lose thousands "in exchange for a paper promise from a politician which would depend on a future government for its honouring", he added. It could also lead to higher risk taking as investors attempt to find better returns under the new regime.
He also claimed it could "exacerbate intergenerational tensions", as the state burden is shifted towards future generations. Employers would likely be less generous with workplace pension funding, harming the lower paid workers.
"This scheme might save the chancellor some money but only at the expense of the country’s long term retirement plans," McPhail said.
Hargreaves Lansdown is not the first group to issue a warning over Osborne's expected reforms, which are estimated to save the Treasury £10bn a year.