The Government has been warned the new financial watchdog set to come into force next year must be more "in touch" with consumers and encourage efforts to save.

The incoming Financial Conduct Authority (FCA) should be given a mandate to put consumer interests at its heart and not just get involved "when something goes wrong", the Association of British Insurers (ABI) said.

The group, which represents the insurance sector in the UK, also called on the FCA to encourage people to start saving towards retirement and make efforts to improve consumer confidence.

The introduction of the FCA in 2013 will follow the break-up of the Financial Services Authority as part of a complete overhaul. Other changes to come into place will see greater powers being handed to the Bank of England.

Otto Thoresen, director general at the ABI said: "This means a departure from a regulator which traditionally only got involved when something went wrong - and a move to an FCA which understands the financial needs of all consumers so that people from every background benefit."

Copyright Press Association 2012