The pensions industry has cautiously welcomed the publishing of the Taxation of Pensions Bill today, which will remove the restrictions currently in place for taking a tax-free pensions lump sum.

The bill will allow savers to take multiple smaller sums from their pension without having to enter into a potentially expensive drawdown arrangement. This has been made possible by removing the requirement that a 25 per cent tax free withdrawal is only applicable to one lump sum withdrawal. The move has been described by many commentators as one that allows over-55s to treat their pensions like a bank account.

AXA Wealth head of retirement planning Andy Zanelli said that giving savers greater flexibility to the way they use their pension savings was a positive step. "However," he said, "retirement planning can be incredibly complex, with a number of financial planning considerations to bear in mind, so that people don’t end up with an unnecessary tax bill, or worse, run out of money before they die."

He warned that people needed to look "beyond the headlines" and consider their tax position and bigger financial picture.

"For example, when linked to the news two weeks ago that the pensions death tax is to be scrapped, people might want to change the way they generate income in retirement from their assets: it may be more beneficial to take money out of their ISAs and OEICs first and leave their pension where it is," he said.

Fidelity Worldwide Investment retirement director Alan Higham agreed with Zanelli, saying: "Pensions were never set up to be bank accounts and the reality is that many can't and won't operate that way."

He said that accessing the flexibility the government was offering would not always be straightforward, particularly as some people would have to move their pensions to do so, opening up margins for error and adding cost.

Cost would also be a major factor for providers when offering further flexibility, said law firm Pinsent Masons’ pensions expert Simon Laight, who also questioned whether all providers would be able to deliver systems to complement the reforms.

“Some of the complexity has been removed – no longer having to carry out regular maximum withdrawal checks – but not all. Running so called banking style pension accounts requires manual intervention or introduction of sophisticated new systems – both costly to implement," said Laight.

“Pension providers [will] need expensive new systems and for that you need scale. We’ll see a land grab as providers rush to develop new banking style pensions and seek to capture market share. It’s a dash for cash,” he added.

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