The lifetime allowance, which limits the total value of payouts people can receive from pension schemes without triggering an extra tax charge, currently stands at £1 million.
The limit has gradually fallen from a level of £1.8m back in 2011, although there are plans for it to increase in line with inflation from April next year.
But Aegon boss Adrian Grace told The Scotsman that the cap should be scrapped altogether to encourage people to save more for retirement.
“It sounds like a lot of money, but if you’ve got a defined benefit pension of £40,000, by the time you get to retirement age you’ll be banging against that £1m cap and that means more people are falling into this net and needing advice,” Grace said.
With the general election less than a month away, he called for the next UK government to provide “stability” for the pensions industry, which has had to deal with a raft of regulatory changes in recent years.
He added: “We want to encourage people to save for the long term, so I’m very supportive of getting back to the fundamentals and getting that lifetime allowance up so people can save for longer.”
When asked what level the allowance should be set at, Grace said: “I’m not quite sure why there should be a cap at all. If people want to look after themselves in retirement, and they want to save for the long term, that has to be the right thing to do.
“Clearly, that saving has to be fair – it’s unfair if higher-rate taxpayers get a better benefit than others, so we need to equalise the system so everybody gets an equal opportunity to save. Once that happens, I don’t see why we should have a cap.”
His comments came as Aegon said that assets on its investment platform business have topped the £100 billion level, marking a “major milestone” for the group.
The firm, which completed its £140m purchase of the Cofunds platform business from Legal & General in January, said combined assets now stand at £102bn.
Aegon revealed the figure as it reported a 45 per cent surge in earnings to £31m for the first quarter of 2017, boosted by “strong” new business flows and a “buoyant” stock market.
Grace said the bulk of the business inflows came from individual pensions and the firm’s “growing army” of financial advisers, but he sounded a note of caution about a lack of access to suitable advice because customers are “struggling to keep pace” with the array of options on how they access their savings.
“The last thing we want is for people to take life-changing decisions without getting the proper advice,” Grace said.
He added: “We believe scale will be vital in the platform market and a record quarter of new sales on the Aegon platform and the strong performance of Cofunds in Q1 put us in an excellent position.
“We’re committed to investing in our platform to deliver the best tools and services to enable intermediaries to grow their business, grow their profitability, better serve their customers and manage their risk and costs effectively.”
The Cofunds acquisition followed Aegon’s purchase of BlackRock’s UK platform and the sale of its £3bn UK annuities portfolio to Legal & General last year.
Grace said the insurer, which employs about 2,100 people in Edinburgh out of a total workforce of 3,200, was already seeing the benefits of the BlackRock deal, having won a “significant” number of corporate customers in recent months.
He added: “The uncertain political outlook is being offset by strong market performance and resilient consumer confidence while the pension freedoms continue to drive advice opportunities with the growth of drawdown including with guarantees.
“Anecdotally, advisers are telling us that enquiries about defined benefit to defined contribution transfers remain high, with demand for advice exceeding supply.”