The labour government had proposed that those earning £150,000 or more should have a taper applied reducing the tax relief to 20 per cent. These plans have now been dropped.
The government hopes that the change will in time save as much as £4 billion. It has also estimated that the change to the annual allowance will affect some 50,000 savers of whom 80 per cent will be earning over £100,000.
The new annual allowance will come into effect as from April 2011; the new lifetime allowance from April 2012.
Mark Hoban, the Financial Secretary to the Treasury, commented: "We have abandoned the previous government's complex proposals and developed a solution that will help to tackle the deficit but not hit those on low and moderate incomes. We have taken a tough but fair decision.
"The coalition government believes that our system is fair, will preserve incentives to save and - compared to the last government's approach - will help UK businesses to attract and retain talent."