Under current rules people can take a quarter of their pension pot in a tax-fee lump sum after the age of 55.

Rules also stipulate the money must be taken within 18 months of the member becoming eligible for their pension income, meaning the money had to be taken as a lump sum either six months before or 12 months after commencement of the income.

However, Chancellor George Osborne’s pension reforms now mean savers will be able to access their funds when they choose, with each withdrawal coming with a 25% tax-free element.

Hargreaves Lansdown head of pensions research Tom McPhail said the legislation will be in place for the start of the next tax year but many pension providers may not be ready to offer the new freedoms to savers.

“The pensions industry is reeling from an unprecedented onslaught of legislative and regulatory change. Some providers have even already publicly called for some breathing space; it seems the Treasury is not listening,” he said.

More details of the new arrangements are due to be set out to Parliament later on Tuesday in a Taxation of Pensions Bill.

Ahead of the publication, Chancellor George Osborne (pictured) told the BBC: “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,” Mr Osborne said.McPhail explained, in theory, pension pots could now be used “like bank accounts”, with investors dipping in to draw income at will.

Investors, he said, could get a monthly payment in the form of a 25% tax free payment, with the balance taxed under income tax rules.

He added: “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.”

However, McPhail cautioned the move. He said: “Investors may be persuaded to hand their money over to investment experts, who will promise to smooth out the investment and longevity risks for them. A few will succeed, many will fail.

“At present there are precious few regulatory controls around the non-advised sale of retirement incomes. In fact it appears that the Treasury is intent on abolishing even the notion of a sales process at retirement, as investors will be able to dip into their pots at will.

“Without regulatory oversight, when investors do run out of money (and they will) there’ll be no accountability for this system failure. The Chancellor appears to be creating the perfect environment for the mother of all misselling scandals.”

‘Nothing new here’

Fidelity retirement director Alan Higham urged people to look behind the headlines.

“There is nothing really new in today’s headlines as the Treasury confirmed this level of flexibility back in August. Today, it’s simply being laid down in Parliament,” said Higham.

He added: “We fully support flexibility and informed access to retirement savings but pensions were never set up to be bank accounts and the reality is that many can’t and won’t operate that way.

“There is an unfolding reality around the level of flexibility that those retiring next April will benefit from.

“To access the full flexibility, people may have to move their pensions and moving isn’t easy; it also has costs and some risks of error. Taking your pensions savings as cash is fine but only once you have secured enough income for life. This has to be thought through.

“People need to make sure they don’t overestimate the State pension and spend their other pension cash too quickly. Seeking expert help to make sure you understand the consequences is vital.”