The Treasury is expected to propose this week that the mandatory cap of one per cent on stakeholder schemes and other financial products should be raised to 1.5 per cent, which could see charges rise sharply on a range of short, medium and long-term savings vehicles.

Mick McAteer, senior policy adviser at the Consumer’s Association, slammed the decision to allow insurers to charge higher fees. He believes it will discourage the very group the government is targeting from saving for the future.

“The main reasons why people do not save are unaffordability, a collapse of confidence in the industry or stockmarket and simply not knowing where to go,” Mr McAteer said.

“The idea of expecting consumers to willingly pay more to invest in a time when there has been widespread mis-selling and they can afford to less than ever, is just ridiculous.”

He continued: “With record levels of debt, pensions will have to be cost-effective to be affordable.

“They need to provide incentives, minimise risk and come with decent standards of regulatory protection to restore confidence.

“Savers have no incentive to tie their money up in risky pensions when they can get 4.5 per cent from a safe cash ISA.”