Webb’s comments come after AJ Bell stated that £3.9bn had flowed into tax-efficient accounts in September ahead of the upcoming Autumn Budget.

Consumer savings are flowing into cash Isas, fueled by significantly more attractive interest rates and increased tax liabilities, AJ Bell said.

Webb said there had been a “long-standing concern” that people were converting their pension funds into cash to access 25 per cent tax-free lump sums and putting the remaining 75 per cent into low-yielding investments such as cash Isas. current accounts.

“Fears about a potential threat to tax-free cash in the budget appear to have led to an acceleration of this undesirable trend,” he added.

“In addition to losing the investment return on cash, savers could also face unnecessarily large income tax bills by withdrawing their money in one lump sum.