Businesses anticipate a sudden rise in pensions costs, after the Treasury Select Committee weighed in behind Adair Turner’s proposal for a national savings scheme which will demand compulsory pension contributions from employers.

The news came to light as Work and Pensions Minister John Hutton promised the most radical rethink on UK pensions since the welfare state was created 60 years ago.

Hutton suggested the impending pensions White Paper will increase the retirement age from 65 and restore the link between pensions and earnings.

The Treasury committee also approved plans to ensure thousands more employees have to be provided with pension schemes, potentially causing financial difficulties for small and medium-sized businesses in particular.