Bosses at major banks have warned Chancellor Rachel Reeves her latest pensions plan could see thousands of savers left worse off.
Ms Reeves has proposed the creation of pension “megafunds” by merging local authority pension funds and using them to invest in projects such as housing.
The plan would see local government pension funds, which hold around £360bn of funds belonging to 6.5 million local authority workers and pensioners, merge their assets to help them grow faster.
It would also mean some authorities setting aside a portion of their funds for investment in the local economy.
However, bosses at Barclays, NatWest, Lloyds Bank and Nationwide have dismissed the plan.
A letter from the industry bosses said: “At the broadest level, the panel believes that clarification is needed on the primary objective of the proposals in order to achieve the desired outcomes.
“If long-term financial resilience is the aim, then a focus on suitability and engagement rather than scale and price cap would have the most significant impact.”
The letter adds that the plan risks ignoring “longer-term investing and diversification”.
The bosses said that they were “broadly supportive” of the mega-funds plan but the current proposals would make defining the size of the fund too complicated.
Earlier this month, Angus Thompson, a councillor and chair of North Yorkshire’s £4.6bn fund for local authority workers, raised concerns about the plans.
He said his funds would be “mortgaged” and then used by the Government.
Mr Thompson went on: “I think it’s all just an excuse on the part of the government to try and get their hands on the money one way or the other.”
Last year, the Government said the policy would allow for the Government to pursue various infrastructure projects.
A statement said: “Pension megafunds will be created as part of the biggest set of pension reforms in decades, unlocking billions of pounds of investment in exciting new businesses and infrastructure and local projects. “
Ms Reeves added: “Last month’s Budget fixed the foundations to restore economic stability and put our public services on a firmer footing. Now we’re going for growth.
“That starts with the biggest set of reforms to the pensions market in decades to unlock tens of billions of pounds of investment in business and infrastructure, boost people’s savings in retirement and drive economic growth so we can make every part of Britain better off.”