New pension freedoms come into effect

Changes to pension rules affecting more than half a million older savers will come into effect from today.

The reforms will mean people aged 55 and over are given complete control over what to do with their retirement savings, as they will no longer have to buy an annuity when they come to retire.

Under the new rules, older savers can instead take their pension pot in one go, or withdraw it in portions - as they might with a bank account.

Read: How pension rules are changing

They will apply to the 320,00 people who retire each year with a defined contribution (DC) pension.

ITV News correspondent Richard Pallot reports:

The changes, introduced in George Osborne's 2014 Budget, have prompted warnings that some may run out of money too early or fall prey to scams.

Pensions minister Steve Webb has said it is "right that people should have the power to make their own decisions" on how to use their retirement savings, but has accepted that some people may "blow the lot and wish they hadn't".

Despite the new freedoms, experts have urged people not to rush into decisions about what to do with their savings.

And Laith Khalaf, a senior analyst at Hargreaves Lansdown, said people should remember the tax implications of withdrawing large amounts of cash at once.

If you're a basic rate taxpayer who has built up a relatively large pension (and you cash it in), you could end up paying a higher rate of tax.

Laith Khalaf, Hargreaves Lansdown

The new rules also mean people can pass on unused DC pension funds to a nominated beneficiary when they die. Previously, the savings were subject to 55% tax upon death.

The Government has launched a free, impartial Pension Wise service to offer guidance for people affected by the new rules.