Middle-class savers will be "actively discouraged" from putting money in their pensions if George Osborne pushes ahead with plans to cut tax relief for high earners.
The Chancellor is considering plans to scrap higher rate tax relief on pensions and move towards a "flat rate", which could be as low as 25 per cent.
An analysis by the IFS suggests that if he goes ahead with the plans in his Budget next month tens of thousands of higher-rate taxpayers will be better off investing in Isas or larger homes.
It warns that for the first time people who expect that they will still be higher rate taxpayers when they retire would be better off putting their money in an Isa.
At present nearly 300,000 pensioners pay the higher rate of income tax, meaning their annual earnings from their retirement pot is over £42,385.
Conservative MPs have warned Mr Osborne that he will face a "riot" if he pushes ahead with the plans with a significant backlash from Tory voters.
The report states: "The government is currently considering what would be among the most radical changes to savings taxation in decades .
"Whatever the outcome of that, the frequency of change in recent years and uncertainty about future reform make it difficult for individuals to plan their long-term retirement saving."
At present basic-rate taxpayers receive a £20 top-up from the Government for every £80 they pay into a pension.
Higher rate taxpayers, classed as those earning more than £42,385, receive £40 for every £60, while top-rate taxpayers receive £45 for every £55.
Under plans being considered by Mr Osborne for a flat rate relief of 25 per cent for all, savers will receive £25 for every £75 they contribute. The move could save the Treasury an estimated £6 billion.
The IFS analysis says that at present pension savings are one of the best investments as they are effectively subsidised by the Government, with a tax rate of -21 per cent for higher rate taxpayers.
However a 25 per cent flat rate or relief could see pension contributions taxed at 9 per cent, leading to a significantly poorer return than other savings options.
The analysis says that someone saving into a pension would need to invest an extra 7p for every pound to achieve the same return as an Isa.
The report states: "If the higher rate relief were less than 30 per cent, higher-rate taxpayers who expected to pay the higher rate in retirement as well would be actively discouraged by the tax system from making employee contributions.
"As far as tax is concerned, they would be better off saving for their retirement via an Isa or a more expensive home."
It adds that basic-rate taxpayers will benefit significantly from the reforms because their tax relief would rise from 20 per cent to 25 per cent.
Jacob Rees-Mogg, a Conservative MP, said: "My principle concern is that we have had endless chopping and changing to the tax benefits surrounding pensions, which has created a feeling of uncertainty that deters people from making long-term plans.
"It is unfair on individuals who are potentially the people should be helping - those who don't want or need to be dependent on the state.
"This has been done completely arbitrarily to take money from one set of people and give it to another."
At the weekend a minister suggested that the Chancellor is entitled to push ahead with his pensions tax raid even though he made no mention of doing so in the Conservative's election manifesto.
Matthew Hanco*ck, the minster for the Cabinet Office, Mr Osborne was not bound by last May’s manifesto which suggested that curbs on tax breaks would be limited to top earners paying the 45p tax rate.
It comes after an analysis by Hymans Robertson, one of Britain's biggest pension consultancies, found that millions of middle-class workers could face a "retirement crisis" under the plans.
The analysis said that two thirds of higher rate taxpayers - equivalent to 3.2 million people - are already not saving enough for their retirement.
It said that a decision to scrap higher rate tax relief on pension contributions would "penalise" middle class savers even further and discourage them from putting aside sufficient money for their retirement.
The Institute for Fiscal Studies also warned that the Government's flagship Universal Credit scheme will "heavily penalise" savers on lower incomes.
Meanwhile, buy-to-let landlords could be forced to pay more in tax than they receive in rental income under a crackdown by George Osborne, the IFS has said.
The Chancellor announced in his Budget that tax relief on mortgage interest will be cut to 20 per cent, rather than the 40 per cent currently enjoyed by higher-rate taxpayers.
It said the reforms will "push many landlords into higher-rate tax" and "weaken the incentive for them to get into buy-to-let property market entirely".
It said that those earning more than £42,385, the higher rate threshold, will see their tax rate on their investment rise from 46 per cent to 76 per cent.
However people earning between £100,000 and £120,000 could see their effective tax rate rise from 56 per cent to 117 per cent.
Individuals in that bracket are hit by a "tax trap" which means they pay the higher rate of tax and an additional 20 per cent income tax as their personal allowance is withdrawn.
The IFS said: "Rental housing looks set to become the most tax disadvantaged of the major asset classes we consider in this report."
