The Government today proposed bringing to an end rules forcing pension investors to buy an annuity at a specific age.
It says, from April 2011, there should no longer be a deadline by which people "effectively have to annuitise".
In a consultation paper published today, it says retirees will be able to choose how much to draw down annually from their pension pot throughout their retirement, subject to a capped limit, or whether to draw any income at all.
It proposes both capped and flexible drawdown options for private pension savers before and after age 75, adding this will make it unnecessary to continue to offer alternatively secured pensions (ASPs).
As part of the flexible option, the Government says unlimited lump sums can be withdrawn on the proviso minimum income requirements are met.
Advisers have already urged caution over an uncapped drawdown option after age 75, saying some investors may find themselves unaware of their dwindling pension pot and run out of income.
The Government will consult on the level of an "appropriate" annual drawdown limit for capped drawdown.
Residual funds will be taxable on death at 55% as per current income drawdown rules. Currently retirees in ASP can find themselves subject to taxes of up to 82%.
Financial secretary to the Treasury, Mark Hoban, today said the proposals will simplify the treatment of retirement savings and reduce complexity for individuals as well as for pension and annuity providers.
He said they would give individuals greater flexibility to choose the retirement options that are best for them, with more choice over how they can provide a retirement income for themselves.
"To encourage people to take greater responsibility for their financial future, including in retirement, we need to give people greater flexibility over how they use the savings they have accumulated.
"This consultation puts forward reforms that will replace outdated and overly complex pensions tax rules with a system that gives individuals greater freedom and choice."
Both the Conservative and the Liberal Democrat manifestos included plans for the ending of compulsory annuitisation. In last month's Budget, Chancellor George Osborne announced the age at which an investor has to use his pension fund to buy an annuity would be pushed back from 75 to 77.
But the Government today relaxed the rules even further. Consultation ends 10 September.
Paul Bruns and Elaine Parkes
3,000 left to transfer
Record numbers of people aged 90 plus
From 3 to 10 October