The campaign, launched by The Daily Telegraph, calls for a suspension of tax paid by pensioners on savings and dividends to help them through the crisis, and it is backed by a coalition of MPs and charities.

This tax break proposal, urges the Government to take measures to stop the over-65s from being crippled by taxes on the savings and share investments they have built up to see them through retirement.

The dramatic fall in savings income has come at a time when basic needs such as food, water or heating have become more expensive. This has hit elderly people especially hard, because most of their income is spent on these basic costs.

Gordon Lishman, Director General of Age Concern, said: “Many older people who rely on the interest from limited savings to top up their income are being hard hit by the double whammy of interest rate cuts and higher basic food and energy bills.

“This could have a big impact on the ability of those living on modest means to make ends meet.”

What many feel is that people should not be taxed repeatedly. They are taxed when they work, taxed when they save and then taxed again on the savings.”

While there are other options to access extra money such as pension release, remortgaging, or asking for a loan, the fact is that a tax cut on savings income and a tax cut on dividends would make an enormous difference for all those approaching the retirement age and those that have retired already.

The Government itself calculates that more than around 9 million pensioners rely on some form of investment income to supplement their basic state pension with an average income of £51 a week – a sum that elderly people use to boost their basic state pension of just £90.70 a week.

“This is now an urgent problem. There has been this rush to get interest rates down and people are now talking about zero per cent, but that is going to cripple millions of people that have saved.

“We need to remember that saving is vitally important to the economy. We could be heading for the nightmare situation where the interest rate cuts don’t get us out of recession but not helping savers makes the problems even worse.” campaigning Labour MP Frank Field declared.

John Redwood, the former Tory Cabinet minister, added: “This campaign is needed and deserves to succeed. To get out of the mess of over borrowing we need more savers.

“The interest rate cut will, in due course, help the borrowers but hit savers hard. It is high time the Government balanced it up.”