The influential pensions commentator and analyst says that the move, if it happens, would risk damaging pensions savings without full and detailed consultation taking place first.
SIPP firm Curtis Banks issued a warning last week about the risk of pension tax relief being cut back and others have joined the call.
There is growing speculation that Chancellor Sajid Javid may use his Budget to cut back on pension tax relief for high earners to fund spending elsewhere.
But Mr Cameron says Mr Javid risks “going too far, too fast and creating adverse unintended consequences.”
He said: “Currently individuals receive tax relief at their highest marginal income tax rate on their personal contributions, so moving to a flat rate somewhere between basic and higher income tax rates would be good news for non-taxpayers and basic rate taxpayers, while higher and additional rate taxpayers would see their Government top-ups reduced.
“In terms of simple appeal, a flat rate relief of 33% would see the Government add £1 for every £2 from individuals. But if set below 30%, higher rate tax payers expecting to pay higher rate tax in retirement might find pension saving unattractive, undermining the success of automatic enrolment which ‘works’ because pension saving is in virtually everyone’s interest.
“Simply removing higher rate relief and granting 20% relief to everyone would not affect basic rate pension savers but would severely dent the attractions for higher rate taxpayers many of whom are far from “wealthy.”
He said that while there were benefits in flat rate relief, when the Government considered such changes back in 2015 it found there were many complexities to consider and changes could do “more harm than good.”
The three biggest issues relate to the tax treatment of employer contributions, how to avoid a ‘salary sacrifice loophole’ and how to apply such an approach to defined benefit schemes.
Fiona Tait, technical director at Intelligent Pensions, said it was “imperative” the government does not leap to a simple conclusion without taking the time to consider the “knock-on effects.” She said the tapered annual allowance problems showed how things could go badly wrong.
Kay Ingram, director of public policy at national Financial Planning firm LEBC, said: “Any change which restricts the rate of relief to a flat rate, or the basic rate, will hit middle aged middle earners hardest; it is likely to result in less being saved for retirement and many people forced to work longer.”
Tom McPhail, head of policy at Hargreaves Lansdown, believes pension taxation reform is necessary but any reform should be part of a “considered review,” not a quick fix.