Pensions in their current form are “past their sell-by date” and could be made more flexible by allowing employers to help in other ways such as the paying off of student loans, the director-general of Saga has said.

A massive overhaul of the pensions system is due to begin this autumn under Government plans to automatically place workers into pension schemes in a bid to tackle the pensions savings crisis.

But Dr Ros Altmann, head of the over 50s group, warned that many people will be put off the idea of having their cash locked in and that schemes should be used as “lifetime savings accounts”, with people having access to their cash as their lives develop.

The changes could include employer contributions being used to help repay student loans for younger workers, who can then save for a pension later in life, Dr Altmann argued.

The Government published its revised timetable to automatically enrol workers into pensions schemes on Wednesday, a process which will start from October with the phasing in by larger companies, while enrolment for smaller business has been delayed to allow them more time to adjust.

But economist Dr Altmann argued that forcing workers into a scheme that would deny them access to their own money for decades would lead to many opting out. Se said: “It is time to recognise that pensions may be past their ‘sell-by’ date and we should consider how we can make them fit better with people’s lives.

“Pensions are not the only savings vehicle worth having, yet Government policy is currently focused almost exclusively on getting people into pension schemes. This is understandable, but not optimal.”

She said: “As we head towards auto-enrolment, with millions of low earners being forced into pension savings from which they have to choose to opt out, we urgently need to also consider how to redesign pensions so that they suit more people.

“Increasing savings is important, but pensions have disadvantages for many savers. Young people, or older workers on low earnings, or those in significant debt or saving for a house, do need to save or pay back student and other debt, but if they contribute to a pension scheme their money is locked up and they cannot access it until much later life.”

Dr Altmann argued that a “lifetime savings” scheme, which could be used if needed for other saving requirements, would be “far more likely to encourage them to save, as well as helping their lives”.