The Government's "full frontal assault" on pension scheme charges will result in savers collecting more money when they retire, the Pensions Minister insisted today.

Steve Webb said more than 99p of every £1 will go into the pension pots of people who are automatically signed up to a workplace pension under proposed coalition reforms.

Mr Webb said employees currently enrolled to a workplace pension are likely to have the scheme chosen for them by their employer, which could leave them paying low-sounding charges but ultimately lose them a significant cash sum in the long term.

He explained if a person saved £100 a month and a 1% pension scheme charge was applied, it could accumulate to more than £160,000 coming out of their pension during their working life.

But Government plans which go out for consultation tomorrow will call for a 0.75% charge cap on workplace pension schemes, according to Mr Webb, which aims to protect people who do not take too much of an interest in their pension.

The minister also criticised Labour's proposed 1% cap as not tough enough.

Speaking during the report stage of the Pensions Bill, the Liberal Democrat told MPs: " What we are proposing is a range of options first of all looking at how far we can get with better disclosure and transparency but also some options on an absolute charge cap.

"We will include in our consultation the option of a 0.75% charge cap on workplace pension schemes.

"This will be a tougher charge cap than I believe the Opposition have called for, who chose 1%, and I think their suggestion of a 1% cap was either based on an exhaustive investigation of the evidence and the data or because it was a nice round number, one or the other.

"We think we should be looking at going further than that. Because we know not enough people are saving for their retirement and therefore every penny they get into the pension has to turn into as much pension as possible. That's why we are going to consult on some pretty tough action on charges."

He added of the coalition's wider plans: " This is a full frontal assault on pension scheme charges.

"We've banned consultancy charges, we are taking powers in the Bill to go further for auto-enrolment schemes, we're looking at legacy schemes, charge caps, charges issues that previous governments have simply dabbled with, we are taking effective action."

Coalition pension reforms also hope to make it easier for pension pots to follow workers when they switch jobs and allow people to claim refunds if they opt to withdraw from a pension fund after 30 days or less, Mr Webb added.

Introducing the charge cap measures, Mr Webb said: " Charges are one of those where you look at the charge quoted on the pension scheme and it might be 1% and 1% sounds pretty innocent because if 99p in the pound of your money is going into your pension, the chances are you think you're getting a good deal.

"But one of the problems with pension scheme charges is they are compounded so in the first year 1% of your fund is taken out and in the second another 1% of what's there and so on. We estimate the cumulative impact of charges can be very substantial indeed, despite innocuous low-sounding charges."

Mr Webb said there had been attempts in the past to tackle charges, with the last Labour administration setting a cap on stakeholder pensions at "what now looks to be an astonishingly high level".

He said s takeholder pensions, in which a person pays money to a pension provider who invests it in things such as shares, were capped at 1.5% for 10 years and 1% a year thereafter.

Turning to a scenario where a person paid in £100 a month throughout their working life to a fund with a 1% charge cap, Mr Webb said: "T he difference between having no charges and 1% charge and £100 a month saving is £160,000 coming out of your pension pot.

"That is why I regard the charge caps that the Opposition sought to apply in stakeholder - and applied no charge cap whatsoever for automatic enrolment -as being alarmingly high and alarmingly gentle on the pensions industry.

"I believe we can do better than that. So, I'm pleased to say we will tomorrow be publishing a consultation document on the issue of charges in automatic enrolment pension schemes.

"We waited before doing this to see the Office of Fair Trading report that was published last month which looked at this market and it found that the demand side of the workplace pensions market was, and I think I'm quoting verbatim here, one of the worst they had ever encountered."

Shadow pensions minister Gregg McClymont claimed Mr Webb and the Department for Work and Pensions (DWP) do not actually know what charges and costs are levied in the pensions sector.

Mr McClymont said the only way the DWP finds out about what pension providers charge employers is through surveys.

He called on the Government to make sure pension charges are disclosed as employers often do not know what they are buying.

Mr McClymont told the Commons: "If one listens to the Pensions Minister, particularly on the issue of pension charges, one does have to listen very closely because there is, how shall I put this politely, a gap between the rhetoric and the reality.

"In one sense, the minister's caught up with the questions that need to be asked about pension charges but actually when one looks at the detail or lack of detail in what the Pensions Minister has announced, we're still a long way from answers."

He went on: "The minister doesn't actually know what is going on in terms of costs and charges in the pensions world.

"We had a very instructive conversation/debate about this at committee stage because the minister was arguing a point with me and he pointed to DWP evidence.

"It turned out the way the minister was courting the evidence was not appropriate but the point I make today is not to criticise the minister for making a mistake in the use of evidence; that does happen.

"But actually it's a much broader point - the DWP is forced to undertake surveys of employers to try and find out what pensions providers are charging them.

"The minister says evidence. Wouldn't a much more effective way to approach things (be) to have the costs and charges laid out for everyone to see in the first place? Why haven't you got on with making sure costs and charges are disclosed?

"Instead the DWP has to take surveys of employers who in many cases, as his own survey evidenced, actually aren't aware of what they are buying in terms of a pension scheme."

Mr McClymont went on to accuse Mr Webb of a U-turn by deciding that a cap on charges for pensions was in fact necessary. He said Mr Webb now believed the pensions market needed to be like the market for baked beans, where consumers have lots of choice and can pick the product they prefer.

Mr McClymont said: "I can see you have changed your mind. I have absolutely no problem with that. Even that you have said you weren't persuaded and that you are now persuaded. That is a defensible position.

"But it does I think give credence to the argument from (Labour) that you have been slow to realise just how dysfunctional this market is.

"It does raise the question, if you didn't get it nine months ago, do you get it now?"

The Bill will create a new single tier pension of £144 from 2016 onwards, which would replace the current system of add-ons and benefits.

The Government believes 90% of people would be better off under the reforms, which will also make it easier f or workers to keep track of multiple pension pots.

As part of the wider reforms, there will be an increase in the state pension age from 66 to 67 between April 2026 and April 2028, while there will be a review of the state pension age every parliament.

There will also be a "triple lock" so the state pension is always increased by higher than earnings, prices or 2.5%.

Meanwhile, those wanting to qualify will have to contribute for a minimum of 10 years, while to gain the full amount it will be necessary to have made National Insurance contributions for 35 years.

Tories Sir Peter Bottomley and Sir Roger Gale called on the Government to remove part of the Bill which stops British pensioners living abroad having their pensions up-rated in line with inflation.

Sir Peter, MP for Worthing West, said around 650,000 overseas pensioners do get the increase because they live in countries which have bilateral agreements with the UK, such as the United States, but over 500,000 who live in countries such as Australia, New Zealand, Canada and India do not.

North Thanet MP Sir Roger described the situation as indefensible.

Moving an amendment put forward by both men, he told the Commons: "If this country can't do what is right then I have to say I feel a great sense of shame.

"The denial of the increase to these people who have served their country, in many cases fought for our country, some of whose friends, family have died for this country, who have paid their taxes, who have worked here, this case is morally completely right and to deny them the money is indefensible.

"It cannot be right can it that a British expat living on one side of the Niagara Falls in Canada has a frozen pension while just across the water on the other side of the Niagara Falls in the United States another pensioner is receiving an increase, year-on-year.

"It cannot be right that this country is prepared to pay benefits to all and sundry who come to the United Kingdom from wherever, with or without the European Union, but still continues to deny to the people who served this country the pension that I believe they have a right to."

Pensions Minister Steve Webb said: "If we were to do that it would not do anything for any of the overseas pensioners who have contacted us as their MPs, it would only remove the freezing for single tier pensioners.

"If all we did was vote for amendment one tonight, all we would do is create a new anomaly... so it's not just what side of the Niagra Falls you happen to be living on, it would be single tier pensions get indexation but everybody else doesn't.

"I think we all know what would happen - we would be back in court... it has been tried and tested by the International Consortium of British Pensioners in a whole range of courts and all have found what the Government is doing is implementing the law of the land as it has stood for decades in many cases."