With speculation rife about what further tinkering to pensions the Chancellor will make, taxation changes are a hot topic of discussion in the sector.

George Osborne is expected to make an announcement on two much discussed policy moves - a possible flat rate of pensions tax relief and the potential creation of a pensions ISA. The Budget speech will take place on 16 March.

Steven Cameron, regulatory strategy director at Aegon, said: “Rumours that the Chancellor is planning to remove the 25% tax free lump sum will be a concern for pension savers.

“Any cut would be a major blow as it’s one of the factors which gives pensions the edge over ISAs for tax efficiency and in doing so makes sure those who are prepared to lock up their money till age 55 are rewarded for this through preferential tax treatment.”

One way the benefit could be binned, he believes, has received little attention.

Mr Cameron said this was the Chancellor’s ability to keep the existing pension system as it is, but simply withdraw or reduce tax free cash.

He said: “With the government looking for savings, this would be a less radical change than the introduction of a pension ISA, but would still benefit the Treasury coffers.”

The introduction of a Pension ISA is the others means by which it might be removed, he said.

Mr Cameron said: “Many people rely on the 25% tax free lump sum from their pension as they transition into retirement. This money is typically used to meet the early costs of retirement when people often reward themselves with travel or home improvements following a lifetime of work.

“Taking a lump sum also gives people time to consider how they want to access their retirement income and doesn’t force them into a decision the moment they retire.”