The government is considering cutting some of the protection against inflation that is currently built into many company schemes.

As things, staff leaving an employer but opting not to take their pension until they retire benefit from a 5% revaluation of their pension fund every year.

But the new proposals would impose a maximum figure of 2.5% with the aim of making it cheaper for employers to run such schemes.

The proposals have been welcomed by the National Association of Pension Funds but were criticised by Brendan Barber, general secretary of the TUC.

“If we were to return to higher rates of inflation in the future this could quickly eat away at benefits built up early in a working life,” he said.