Helen Liddell, Economic Secretary to the Treasury, yesterday published proposals to award a Government "benchmark" to savings and investment products with low charges and no catches.
Mrs Liddell said the benchmark "will be easy for people to understand and help them avoid making poor choices." It will be applied to Individual Savings Accounts (ISAs), the tax-privileged accounts to be launched next April.
But investment managers slammed the proposals for pushing investors into "tracker funds" - funds which track an index such as the FTSE 100 - simply because they were cheaper.
Phillip Warland, chairman of Autif, the investment trade body, said: "The Treasury appears not to be able to understand that people are prepared to pay for something that is between a tracker fund and a deposit account in terms of risk. Many people are risk averse."
Fund managers fear Treasury endorsement could swell the coffers of tracker funds, leading to a surge of liquidity in companies included in an index, artificially overvaluing them. Small companies, meanwhile, will be starved of cash.
The Treasury will set three separate benchmarks for three kinds of ISAs: cash: insurance; and stocks and shares. However, it will not endorse any share investment that is actively managed.
Andrew Barket, chairman of the Association of Investment Trust Companies, said he was "astonished" that investment trusts had been excluded.