The Conservatives have unveiled plans to remove the cap on worker's pension funds providing employers open their pension schemes to all staff.

Rejecting the chancellor's £1.4 million cap on an individual's pension funds, the shadow welfare secretary argued that the government's policy is "fundamentally flawed and it won't work".

But he said employers must also open up their pension funds to all workers.

"The limit goes if all the company's employees - from the highest paid to those on the minimum wage - are given access to the scheme on the same terms. We would also still need to keep some limit on the value of the tax-free lump sum," said David Willetts.

"We now have two nations in pensions. It's back to the bad old days of managers versus workers.

"That's not the sort of society we want. Our proposal will once more create one nation in pensions. Nobody held back. Nobody left behind."

The Conservatives have raised a series of concerns about the government's decision to restrict an individual's pension fund to a maximum sum of £1.4 million.

"There are three big problems with Gordon Brown's proposal. First, the proposed limit is in practice lower than the current earnings cap and would affect far more than the 5,000 people claimed by ministers. One independent estimate was as high as 600,000," Willetts said.

"Secondly, the proposal only to up-rate the limit in line with prices will cause all sorts of problems.

"Ever greater numbers of people could be caught in the trap and planning ahead will be impossible as no-one can predict the future value of their fund.

"Thirdly, the new rule imposes massive new administration costs. Every scheme would be obliged to report every year on the fund value of every member. That's a nightmare."

Willetts said he wanted more people to invest more money for their retirement. "The challenge is not to limit the amount of money people can have in their pension schemes," he said.

"The challenge is the opposite - to encourage more people to put more money in to their pensions."