David Willetts has warned that Britain's pensions crisis is as big a threat as terrorism or global warming.

In a speech to the Politeia think tank on Monday, the shadow pensions secretary was set to warn that the crisis is "going to change the shape of the British economy and indeed society for decades".

While ministers have rejected accusations of complacency, the Conservatives believe the government is underestimating the scale of the problem now facing the UK.

Deficits in company pension schemes have already risen up the business agenda, while unions have attacked the closure of final salary pension schemes.

Increasing lifespans and changes to accounting rules have been blamed for many of the problems now facing the pensions industry.

But Willetts condemns Gordon Brown for increasing taxes on pension schemes, saying the move was "the biggest single disaster of his chancellorship".

Crisis

The shadow pensions secretary was expected to warn that companies could go bankrupt, taxes could go up and local government also faces major problems as a result of the savings crisis.

"The scale and implications of the pensions crisis is still not understood," Willetts says.

"But I believe it is up there with terrorism or global warming as a threat to much of what we value."

Highlighting the risks ahead, he also warns that Britain "is heading for long-term welfare dependency".

"We need to make savings more attractive. That is why we have to reverse the spread of means-testing," he says.

"It also means increasing the returns that pensioners get on their savings.

"If companies don't have to set so much money aside to cover greater life expectancy then they can offer a better deal to their savers."

Setting out his party's latest thinking, the Tory front bencher backs the scrapping of rules that require at least three quarters of pensions savings to be spent on a compulsory annuity.

And he suggests that the government could issue gilts, possibly linked to lifespans, to reduce the "longevity risk".