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The pensions minister said his department was looking at "various policy options" including making some benefits "more generous".

He was speaking at a fringe meeting at the Labour Party Conference on Sunday night, as part of a panel discussing the future of pension provision.

He addressed concerns raised by the Pensions Policy Institute people receiving means-tested benefits could lose out because pensions savings are taken into account when calculating their payouts.

Mr O'Brien said: "We are going to look at some of the various policy options. Do you change some of the rules around benefits, so that you make them more generous, or some kind of mechanism so that you help people in some specific circumstances?

"They have all got a cost. What is the opportunity cost to the government if they were to pay for this?"

Nikki Cleal, director of the PPI, who was also part of the panel, said all her research so far has suggested protecting those set to lose out to the problem would come at a cost to the public purse.

She said that the other alternative the government has considered, was raising the amount of savings a pensioner can take as a lump-sum payment on retirement, rather than being required to annuitise.

This trivial commutation level is currently set at £16,000 but she said doubling it could be a solution. But she also claimed the government could be sceptical of the plan as it might undermine the view of pensions as a retirement income.

A PPI report last November claimed if the government did opt for raising benefits, through a pension income disregard, it would cost £600m a year to effectively counteract losses.

The other speakers at the event in Manchester's Jury's Inn Hotel were John Jory, chairman of construction industry employee benefits advisers B&CE and Social Market Foundation board member Brian Pomeroy.

It was chaired by Nicholas Timmins, public policy editor of the Financial Times and the group also examined the possible impact of auto-enrollment on firms' existing workplace pension schemes.