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Billy Mackay, marketing director of A J Bell, applauded George Osborne, shadow chancellor, stating a Conservative government would want to abolish compulsory annuitisation at 75, on condition the person has sufficient income in retirement to avoid means-tested benefits.

But he said he was disappointed by the government's reponse to AJ Bell's argument that ASPs were not fit for purpose.

He said: "To say that ASP is a solution is naïve. It is not fit for purpose. The only solution is to soften the tax rules.

"The Conservatives have publicly accepted the strength of our arguments for changes to the ASP tax rules.

"The government appears keen to remain loyal to a policy that is impossible to defend. The case for reviewing the ASP death benefit rules with a reduction in the tax on lump payments from 82 per cent to 55 per cent remains clear."

Andrew Roberts, a partner of actuarial firm Barnett Waddingham, said: "At last the message is getting through to the House of Commons that private sector pension provision is a must for the majority of people in Britain yet pension saving will only happen if there are incentives and attractive saving products.

"Pension savings represent a good investment for government as they provide a future stream of income tax revenues. If pension saving is not encouraged today then it will not only be the pensioners who will be destitute in the future. The Treasury will also suffer.

"Having plundered UK plc's savings, and spending more than UK plc's earnings, the government should not be allowed to fritter away future streams of revenue."

Phillip Mines, chartered financial planner of Brighton-based IFA Antrams, said: "The abolition of compulsory annuisation would be a great idea. I am not too sure that confidence in pensions will be improved but it needs to be.

"My gut feeling is that there has been a lot of mis-information put out about pensions and my key gripe is that people think pensions are just a wrapper and pensions have underperformed but it is the underlying asset classes that have.

"Pensions are a great wrapper. The harsh reality is people are not saving enough."