A range of simple savings and investment products has been proposed to encourage people on low incomes to save more.

The Government suggested the stakeholder-style products, with charges probably capped at one per cent, would include a product for investing in shares, a with-profits product and a pension.

It is also considering introducing a savings account, an annuity and a financial health check.

The proposals follow recommendations made by Ron Sandler's review on longterm savings last July.

He said the UK savings industry was uncompetitive and called for a range of simplified products aimed at people on low incomes.

The products will have strict limits on features to ensure they remain simple and easy to understand.

The proportion of assets which can be invested in shares will be capped to limit any potential loss to consumers, with the rest put into less volatile assets such as cash, bonds and property.

There will be a consultation period before the final specifications of the products are published in the summer.

The Association of British Insurers (ABI) welcomed the consultation but warned the proposed one per cent price cap might prevent the products reaching the Government's target group.

Alan Woods, head of life and pensions at the ABI, said: "We are pleased they are opening up the question of price capping for debate and have agreed to commission independent research. It is important that the product design, regulation and price all fit together sensibly.

"Get this policy package right and it could mean a big extension of access to financial services."

The Consumers' Association welcomed the proposals but warned a lot needed to be done to ensure the products were sold safely and met consumers' needs.