Further radical change to pensions would amount to a stealth tax on employees, industry leader Phil Loney has warned.

Mr Loney, chief executive of mutual Royal London which employs 1100 in Scotland, said the Treasury’s proposal for ‘pension Isas’, with all tax relief scrapped, would undermine the government’s long-term savings reforms.

The Treasury is consulting on options for limiting tax relief which include removing it from contributions during working life, delivering a £26billion windfall to the Treasury, and promising tax-free pensions in payment.

Mr Loney said there was poor public understanding of what it would involve.

“The first thing people don’t understand it they would pay substantially more tax here and now, on their own contributions and on their employer’s contributions, which would then be treated like benefits in kind. They would have a significantly higher tax bill straight away under this regime.”

He went on: “Secondly, because you get tax relief upfront it goes into your pension pot right from day one and helps swell the size of your pot, and those early contributions have the most time to grow. People would immediately have smaller pension pots. Thirdly, can I really believe that 30 or 40 years from now I can trust whoever is chancellor then to actually let me take my money out tax-free?”

Pensions minister Baroness Altmann has been quoted as saying the radical scheme is a “bad idea”, but Mr Loney commented: “This consultation is run by the Treasury and I suspect that the Treasury agenda and Ros’s agenda might not be perfectly aligned.”

He added: “People have complete certainty in the current system...that you won’t pay twice. We really think radical change could be a significant threat to getting people saving. ”

He was unveiling record new business figures in its third quarter, as Royal London benefited from the early months of the new pension freedoms. The mutual vies with Standard Life and Prudential as top provider of drawdown, which has replaced annuities as retirees’ favoured option.

A surge in drawdown sales helped push new life and pensions business up 35 per cent to £4.9billion in the nine months to October.

Drawdown sales grew 67 per cent year-on-year to £966m.

Sales of individual pensions were up by 52 per cent to £1.4bn, and workplace pension sales rose 11 per cent to £1.9bn.

New business inflows at Royal London Asset Management were down by £400m, to £2.5bn, compared to the same period in 2014, with total assets up one per cent to £83.1bn. The Ascentric wrap platform saw gross sales rise 19 per cent, to £1.9bn.

Mr Loney said : “We have now come through the initial period of pension freedoms and we have seen new trends emerging in the market.

“Clearly a lot more advisers are recommending income drawdown for their clients and we have seen advisers choosing to transfer their clients into our flexible personal pension arrangement in anticipation of exercising freedoms at some point in the future.”

Royal London has introduced the industry’s first ‘profit-share’ , giving most pension customers a stake in the group‘s profits.

Although some rivals have criticised it as a “gimmick”, the mutual says consumer research by Harris indicates that nine in ten of the UK population find the idea of profit sharing appealing and almost half say they would “definitely” or “very likely” increase their own contributions if profit sharing was available.

Mr Loney said: “We believe that all pension providers have a duty to think through how to encourage customers to engage further with their pension arrangements and to save more in the future in order to improve their retirement income.”