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Following extensive lobbying from the ABI and other industry players, the government has confirmed that it will ensure there are strict limits on the contributions that people can pay into personal accounts pensions, which are due to be introduced from 2012.

Under the changes there will no longer be a higher contribution cap in the first year of personal accounts, and no facility to add lump sum contributions, although this will be reviewed in 2017.

The ABI said this decision would help to ensure that personal accounts stay focused on their target market of low and moderate earners, complementing rather than competing with existing private pensions.

ABI director of life and savings Maggie Craig said: "It's good news that the government has acted on this important issue.

"Enabling a higher first year limit, and the payment of lump sums into personal accounts, would potentially have damaged the existing pensions market and therefore hit the people who save in them.

"We are pleased that the Government has now taken the right decision. This is a good result for the millions of current and future savers in private pensions."