Call to arms over government small pots failure

They urge greater collaboration between departments of state and other bodies like regulators, with frequent meetings to address the issue.

The letter will be sent out this week to pensions minister Steve Webb; financial secretary to the Treasury Mark Hoban; Financial Services Authority (FSA) chairman Lord Turner; chancellor George Osborne; chief secretary to the Treasury Danny Alexander, and; cabinet office minister Oliver Letwin.

The move follows a report released last week by the ILC, claiming the government is not doing more to encouraging saving because it would rather people paid off debts before using ISAs and pensions.

The letter recommends tax relief on pensions should be scrapped and replaced with 'lifetime bonus savings accounts', which would see the government match occupational pension contributions instead.

ILC director of policy and communications David Sinclair said: “The current policies on long-term saving are not working – especially for young people.

"The industry believes better communication is needed between government officials in order for the situation to improve. They can’t take control of the situation if they don’t talk to each other.”

Jamie Jenkins, head of workplace strategy at Standard Life, responded to the policy changes proposed by the report: “We welcome any initiatives that will improve long-term savings habits.

“However, for now, we believe smaller, stepped changes within the current framework offer a more realistic opportunity for success and should be considered in the first instance, especially at a time a time when employers and employees are adjusting to the changes brought about through auto-enrolment.”