Speaking at the Liberal Democrats Autumn conference in Glasgow yesterday, Webb said that consumers must be the centre of product innovations carried out in light of the flexibilities.

He said: “While it is difficult to regulate products that don’t yet exist, I am clear as a Liberal Democrat that we must watch the industry like a hawk and step in if necessary to make sure we do not have a repeat of some of the past horror stories for which the pensions industry has unfortunately become all too well known. “

The minister hailed the success of auto-enrolment, which celebrates two years this month, and said ten million people would be in a pension by 2018 as a result of the initiative.

But he remains concerned about the 8 per cent minimum contribution rate and proposed it rise in line with pay increases as a form of auto-escalation.

“I am quite attracted to the idea that when you start a job the norm is that each time you get a pay rise a part of the extra cash goes into your pension, building up gradually to a worthwhile sum,” Webb said.

He called for a single rate of tax relief to be applied to pensions in order to “rebalance the money so that everyone, rich or poor” received help at the same rate.

According to Webb, this could also reduce the cost of tax relief, which is around £37bn a year.

Barnett Waddingham senior consultant Malcolm McLean said both proposals had merit and were worthy of consideration.

However, he said the 30 per cent tax relief rate previously suggested by Webb was too high to achieve substantial savings.

McLean added: “The Treasury would also probably need some hard evidence that this would stimulate saving from standard rate taxpayers and result in an increase to pension saving overall.”