Private-sector workers could see their final salary pensions “eaten away” by the rising of cost of living after ministers proposed removing legal protections against inflation from “gold-plated” retirement funds.
Almost two million employees who are still part of final salary schemes could lose the legal right to have their retirement income rise in line with inflation under the proposals.
The change, which would not apply to public sector workers, could cut the spending power of a pension by almost a third over a 15-year retirement.
Workers could also be forced to wait longer before drawing their pension because companies would be allowed to delay workers’ retirement in an effort to save money.
Additional benefits such as survivors’ rights, which pay an income to widows and widowers, could also be lost.

Mr Webb’s proposals would be the second change to pension indexation in as many years. In 2011, the Government said pensions should rise in line with the Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI). CPI is typically around 0.7 per cent a year lower than RPI, so pension incomes rise at a slower pace.