Contributions to UK pension funds are �34bn less than the government has been claiming, say the Conservatives.

The accusation came during a Tory-sponsored debate on the "crisis in funded pensions" in Parliament on Tuesday.

We are going to have an impoverished retirement if we carry on saving at this level.

David Willetts

The debate follows an apology from Work and Pensions Secretary Andrew Smith over a statistical error which meant pensions contributions were overestimated.

The mistake - the second of its kind in recent months - has been revealed amid growing worries about people saving for old age.

Shadow work and pension secretary David Willetts branded the government "complacent" in its approach to pensions.

But Mr Smith said he had proof that the Tories wanted to privatise the basic state pension.

He told MPs that he had a copy of a letter sent by Mr Willetts to a fellow Conservative MP, Andrew Mitchell.

Mr Smith said: "Let's remind ourselves what it said: 'Here's the material I promised you about a funded alternative to the basic state pension'

"And it goes on: 'The vision of moving to a funded alternative to the basic state pension is a powerful and compelling one which you and I share'.

Mr Smith went on to argue that the dividing line in the debate was clear: the government believed in a balance between state and private funding.

"[The Conservatives] believe in privatising the basic state pension."

But Mr Willetts said: "For too long [the government] have had their head in the sand - now is the time to admit there is a problem," he told MPs.

Longer lives

More had to be saved for people's old age.

Mr Willetts acknowledged that a range of factors such as longer life expectancy rates had a bearing on the decline in final salary schemes.

"We face a Labour environment for pension provision and what it means is less saving, lower funded pensions and a poorer retirement for millions of British people."

Mr Willetts added: "The effect of the tax increases and reduction in value of contracted-out rebates is to drive pensioners, now and in the future, on to means tested benefits - and more dependency on welfare."

The Tories were committed to reform of annuities, less means testing and cuts in the burden of regulation on pension funds, he argued.

For the Liberal Democrats Steve Webb said the government should measure how many people in the workforce were on target for a decent income in retirement.

He then highlighted the particular "trouble that's building up for women that the state second pension won't address for 40 years and even then only in a very limited way".

Review launched

Increasing numbers of companies are stopping final salary pensions schemes.

The Commons work and pensions select committee on Tuesday published the government's response to its report on the government's pensions credit.

Mr Smith has launched a review of government figures, which greatly exaggerated savings.

David Willetts is leading the Tory pensions attack

The Conservatives say the real figure could be closer to �51bn and not the �86bn originally claimed by the government.

Mr Smith has said the Office of National Statistics is to examine the figures.

"We apologise where figures previously given in good faith by ministers on the level of pension contributions are now subject to review," he told MPs on Monday.

Radical action?

The government would also consider "radical and concerted action" to sustain final salary pension schemes which are being cut by firms, added Mr Smith.

Smith: All figures should be treated with caution

The error revealed on Monday follows the withdrawal of some statistics by ministers on the total worth of pension funds after it became apparent they too contained mistakes.

Mr Willetts said at the time that it was a pity that Mr Smith's first appearance at the despatch box in his new job was to admit a serious error made by his predecessor.