As employers continue to cut back on private pension schemes, former Downing Street adviser Ros Altmann is warning that younger people are particularly at risk of facing an impoverished retirement.

The number of firms that are either shutting or reducing their contribution to schemes — which pay a percentage of a worker’s earnings on retirement — has soared to its highest since records began, due to increasing costs.

Companies are replacing their traditional schemes with defined contribution schemes which do not promise any specific amount. “The pension we were relying on from our employer is disappearing,” Dr Altmann, 52, tells People. She advises: “For young people with debts, it may be that they are better off paying them back or saving to buy a house, rather than automatically putting money into a pension. They could save in an ISA instead as this money can be retrieved. With pensions, once the money is in there, it is locked away and you can’t do anything to get it back.”

Dr Altmann, who was victorious last year in campaigning for the government to compensate members of collapsed pension schemes, was recently named Pension Professional magazine’s Pensions Personality of the Year for the second year running. But she is not getting complacent. She is currently campaigning to get the government to change its proposed personal-pension account policy — which will apply nationally — to be introduced in 2012, requiring employers to pay just a minimum of 3 per cent into pension schemes.

“These accounts are terribly dangerous. Employers are currently putting in more than this but will be tempted to cut back to the minimum. People will be automatically enrolled into these personal accounts but may be best advised to opt out.”