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Speaking at a Scottish Widows pensions’ discussion, Mike O’Brien confirmed that there was some substance to concerns that employers who currently contribute more that 3 per cent minimum requirement for personal accounts would reduce their contributions in line with the minimum level.

However, he added that there were ways the government could reduce the risk of employers levelling down contributions.

O'Brien said: "Levelling down will be minimal and by in large I think employers will stick with what they’ve got. I can’t guarantee employers won’t level down, but what I can do is reduce the opportunities for them to level down."

Under the proposed pension reforms all UK workers, who do not already belong to a suitable company pension scheme, would be automatically enrolled into a personal account.

Employers would then deduct pension contributions from employee's pay at a rate of 4 per cent of salaries between £5,035 and £33,540 a year, with adding their own compulsory contribution of 3 per cent.

O'Brien said the reform was needed as one sixth of the UK population were making no provision at all for their pension which is why the government was reforming the pension system.

He added that one way of reducing the risk of employers levelling down contributions was to put a cap on the overall contribution levels, as well as by insisting there are no transfers in and out of the personal accounts scheme.

"We want to send the signal that the 3 per cent employer contribution is a minimum and we expect most employers to contribute more," he said.

O’Brien also highlighted the importance of personal accounts because there are no guarantees that the state pension would be around in 10 years, but clarified that, as of yet, there were no plans for this to end.

"None of us know what will be around in terms of pension provision in 10 years. Betting on a state pension is not the best idea in the long term. Things change and we need to raise awareness that people should save and should save early if they want a decent retirement."

According to O’Brien, the introduction of personal accounts represents one of the biggest pensions reforms since 1948.

"Some people will want their head examined if they do not see the opportunities that 2012 will provide," he added.

However, Liberal Democrat spokesperson on work and pensions Lord Kirkwood raised concerns that the majority of the UK population were not yet mentally prepared for the changes. He added that the indebtedness of the population combined with the credit crunch may hamper the success of personal accounts.

"I don’t see the government addressing extent of the [education] problem to make personal accounts a success," said Lord Kirkwood. "Without public education the whole thing risks failure."

According to the latest statistics by Scottish Widows, 61 per cent of those in the £10,000 to £30,000 salary bracket cannot afford to save more than they currently are. However, 33 per cent said it was likely that they would join the scheme.

The government predicts that by 2015 nine million people will be saving for pensions at a level of around £10bn a year as a result of personal accounts.