Savers, insurers and pension companies are underestimating the consequences of the UK's ageing population, the City watchdog has warned.

In a report entitled "Financing the Future: Mind the Gap!", the Financial Services Authority (FSA) said too few people are saving enough for their old age.

The regulator is also concerned that some insurers could face bankruptcy if they fail to adapt to increased longevity.

In the report, the FSA calls for better consumer understanding of pensions, and proposes greater checks on the sale of pension products.

It plans a review of the qualifications and "ongoing" competency of advisers who sell complex retirement products, such as income release plans.

The watchdog added that it was considering "more closely" the quality of in-house audit controls used by pension firms.

Ageing population

Carol Sergeant, a divisional managing director of the FSA, said: "The consequences of an ageing population have not yet been fully appreciated.

"It will not be enough for the industry simply to continue offering the products that worked 30 years ago."

About 30% of the population will be over 60 by 2030.

In the report, the FSA sets out a plan aimed at improving consumer understanding of pensions products and ensuring that adequate checks are made on the sales process.

The plan focuses on six key areas:

• Encouraging retirement saving, particularly among the young.

• Improving consumer understanding of investment risks and the need for planning and saving for retirement.

• Increasing older consumers' understanding of annuities, income withdrawal and equity release.

• Improving finance companies' techniques for managing the burden of increased life expectancy.

• Checking whether there may be an increased potential for mis-selling due to the introduction of new products, such as equity release and complex annuity instruments.

• Reviewing the qualifications and competency of advisers who sell retirement products.

Mis-selling concerns

The FSA expressed concern over the growing "decumulation" market, which includes equity release schemes, and long-term care insurance and complex annuity products, such as income drawdown.

Tailored "decumulation" products - which aim to "unlock" money accumulated over a person's working life, have been emerging over the last few years.

The FSA is concerned that many finance professionals may not be adequately trained to advise on how to use these products.

It plans to introduce a training regime that updates and re-tests advisors' knowledge from 2004.

Another area of concern is whether the selling of products is being dictated by fat commissions generated through the sale of income drawdown plans.

The watchdog plans to visit selected firms to determine the extent to which this may be affecting sales pitches.