Under the plans, the Treasury said billions of pounds of investment could be 'unlocked' in the UK economy from DC schemes and pension pots for savers in DC schemes could be boosted by over £11,000. 

The review will also look at how to unlock the investment potential of the £360bn local government pensions scheme, as well as how to tackle the £2bn that is being spent on fees.

New Pensions Minister Emma Reynolds said: “Over the next few months the review will focus on identifying any further actions to drive investment that could be taken forward in the Pension Schemes Bill before then exploring long-term challenges to ensure our pensions system is fit for the future.”

She said there was much untapped potential in the UK pensions markets, a sector worth around £2trn.

Steve Webb, partner at actuarial consultants LCP, said: “The limited measures listed in the King’s Speech for the forthcoming Pension Schemes Bill had seemed to suggest that the new Government’s own agenda would be on a slow track to implementation, potentially awaiting future legislation in a future King’s Speech.  

“But by operating a two-stage pensions review, with an early hunt for measures which could be added in to the current Bill, the Government has the potential for faster implementation of measures which it believes would promote the ‘productive’ use of pension scheme finances.”

He said measures likely to receive particular focus could include:

• The use of the Pension Protection Fund as a ‘public sector consolidator’, bringing together potentially thousands of smaller DB schemes and others deemed unattractive to the private insurance market; the idea is that the PPF would be able to invest for the long-term and in assets which may not be open to small, mature pension schemes;

• The potential to encourage DB pension schemes to ‘run on’ rather than move to immediate de-risking with an insurer, including measures to allow sponsors to extract surplus from the best funded schemes; this could have multiple attractions to the government, including slowing the sale of gilts (as schemes move to buyout), sustaining productive investment for longer and generating surplus cash to benefit corporate sponsors, DB members and potentially the DC generation.

The Treasury said the first stage of the review will report in the next few months and consider further measures to support the Pensions Bill. It will take account of the need to prioritise gilt market stability, liquidity and diversity. It will then broaden out to consider the wider pensions landscape to 'strengthen security' in retirement.