Tim Breedon, the chief executive of Legal & General, criticised the Government’s controversial plans to introduce a flat-rate of capital gains tax, arguing that the insurance industry would be a “net loser”.

Mr Breedon said financial advisers were not recommending specific investment products while uncertainty still surrounded the tax issue.

He said: “We urge the Treasury to take this seriously and to amend the proposals. There are unintended consequences here that might have serious effects on savings behaviour.”

Demand for investment bonds, which would lose tapered tax relief under Alistair Darling’s plans, would probably fall by about 20 per cent under initial proposals to levy a flat rate of 18 per cent, Mr Breedon said.

He was speaking as L&G reported an 8 per cent increase in UK life and pensions sales to £1.16 billion, but retail investment sales fell 1 per cent to £344 million. A nervous housing market pushed mortgage protection sales down by 3 per cent to £223 million.