The government is set to scrap the requirement to purchase an annuity and abolish alternatively secured pensions.
In an HM Treasury consultation on annuity reform - published today - the government said that, under the new regime, retirees would have the choice to go into either a capped drawdown system where income can be withdrawn subject to annual limits or else they can go into a flexible drawdown arrangement whereby unlimited lump sums can be withdrawn on the proviso minimum income requirements have been met.
The level at which the minimum income requirement will be set will be an issue for debate during the consultation.
At any time the retiree will be able to use some or all of their income to purchase an annuity if needed.
Residual fund 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 said the consultation document sets out proposals that 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.
Hoban said: "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"This consultation puts forward reforms that will replace outdated and overly complex pensions tax rules with a system that gives individuals greater freedom and choice."
Hargreaves Lansdown head of pensions research Tom McPhail: "This consultation is a revolutionary change, putting investors in charge of their own retirement plans."
However, TUC general secretary Brendan Barber said the annuity consultation was "irrelevant" for the vast majority of pensioners and pension savers.
Commenting on the consultation, Barber said: "This is only an issue for the top few per cent of the richest pensioners who do not need to worry about whether their pension pot will run out before they die.
"Too many of the super-rich take advantage of the huge tax relief on pensions and shovel away more than they need into their pension pots when they are working.
"Now they want to be able to be able to take it back out of their pension when they have died and instead pass it on to others. It's not much more than a demand to introduce hereditary rights to tax avoidance.
"There's a lot wrong with money purchase pensions and our annuities system, but changes to the age limit without a more fundamental look at the whole issue is not the way to proceed."
The consultation will run for eight weeks and will close on September 10.
Lowest level since 2016
Subset of fintech
Just one-fifth not in favour
Armed forces charity
PI providers adding constraints to cover