Under current rules, savers over the age of 55 can withdraw 25 per cent of their pension as a tax-free lump sum. However, under the reforms, they will be able to withdraw money from it whenever they want, with 25 per cent of the sum still tax-free.

The new arrangements for what has been dubbed a “pensions bank account” will be explained in detail in a Taxation of Pensions Bill published today, the BBC reported.

Hargreaves Lansdown head of pensions research Tom McPhail said: “In theory this does mean that pensions could be used like a bank account, with investors dipping in to draw income at will. Investors could receive each monthly payment in the form of a 25 per cent tax-free payment, with the balance taxed under income tax rules.”

“It could also possibly mean investors drawing their tax-free lump sum but deferring the taxable balance. This balance could then be passed on to beneficiaries on death and could potentially avoid any tax charge. Pensions will be – in theory at least – supremely flexible.”

The government’s pension reforms have the potential to “revolutionise” investors’ appetite for long-term savings. But with little provision for advice and a lack of regulation around non-advised sales, inexperienced investors are at risk of being disappointed, he warned: “The Chancellor appears to be creating the perfect environment for a misselling scandal.”

In the March Budget, the Chancellor George Osborne outlined plans to reduce limits on income drawdown. Ahead of today’s publication, he said:”People who have worked hard and saved all their lives should be free to choose what they do with their money, and that freedom is central to our long-term economic plan.

“From next year they’ll be able to access as much or as little of their defined contribution pension as they want and pass on their hard-earned pensions to their families tax free.

“For some people an annuity will be the right choice whereas others might want to take their whole tax-free lump sum and convert the rest to drawdown.

“We’ve extended the choices even further by offering people the option of taking a number of smaller lump sums, instead of one single big lump sum.”

The rule change will still need the help of providers to work however, with firms in a position to make life difficult by imposing additional fees if they choose to do so.