THE government's flagship scheme to encourage low income earners to save for their retirement is failing, according to research by the industry lobby group.

Only 1.5 million stakeholder pension schemes have been sold since 2001 when the scheme was launched, the Association of British Insurers said.

The research also showed that of the 350,000 UK companies which have set up stakeholder schemes, 82 per cent of those remain "empty boxes" with no members, while only 13 per cent of employer-based pensions have contributions from employers.

Mary Francis, director general of the ABI, said: "Stakeholder pensions have so far fallen short of expectations. We need more action now to ensure that people use them to start saving for a decent retirement."

Stakeholder pensions were launched in April 2001 and were designed to supplement the basic state retirement benefits every UK citizen is entitled to receive.

The take-up has been lacklustre to date, with only 166,245 policies sold between April and June 2003, 10 per cent fewer than the same three months last year. And 47 per cent of payments to stakeholder pensions have so far simply been transfers from other pensions so do not represent new savings for retirement.

To kick-start the scheme, the ABI today proposed a five-point employer action plan for the government's new Employer Taskforce headed by Sainsbury's boss Sir Peter Davis.

It recommends a government-led programme to encourage employers to do more on pensions, such as promoting the schemes they run.

This could allow employers to promote the schemes they sponsor and help them meet to cost of advice through tax credits.

The proposals also recommend giving employers practical advice through an information pack.

Ms Francis said: "Pensions are inextricably linked to the workplace. Our proposals will involve employers and help them help their workers."

Active employer involvement in pensions increases the take-up of schemes fivefold, according to ABI research.