The introduction of stakeholder pensions has failed to make a significant dent in the UK's annual £27 billion savings gap.

The Association of British Insurers (ABI) said, despite more than a million of the low-cost pensions being sold since their launch, they were not reaching their target audience.

Sales of all types of pension had suffered due to the stock market turmoil, said the ABI. It called on the Government to consider new incentives to encourage people to save for their retirement.

Stakeholder pensions were introduced by the Government in April last year to provide a low-cost alternative to personal pensions in a bid to get people on low incomes to save.

But the ABI said while 1,151,327 stakeholders had been sold between April last year and September this year, monthly sales had now fallen to less than 50,000.

Ninety per cent of the schemes set up by employers for staff had no members and only nine per cent of firms made contributions to the schemes if their workers did take them up.

ABI director general Mary Francis said: "Despite an encouraging start, our report shows that stakeholder pensions have stalled. Falling markets have understandably discouraged new saving for the time being.

"Now more than ever we need the Government to encourage more people to save for the future."

The ABI said stakeholders had been held back because costly sales regulation combined with the one per cent price cap on charges made it uneconomical for providers to market and run the policies, particularly as the people they targeted had only small sums to save.

This meant the pensions might never reach the Government's target market and sales were drifting towards more substantial earners who made higher monthly contributions.

The ABI wants the Government to introduce lighter-touch regulation for stakeholders, in line with proposals in the Sandler Review on long-term saving.