Up to 200,000 pension savers could cash in their retirement fund next year, according to new research.
From April, the government will allow savers to take out their money from their pension pots when they reach the age of 55 and spend it as they see fit. Tax penalties will be reduced on those who withdraw their savings in a lump sum and subject to marginal tax rates.
Investors Hargreaves Lansdown polled more than 1,000 UK adults aged between 45 and 65 with defined contribution pension savings. Of this sample, 12% said they would take advantage of the new freedoms, taking the whole pot in one go.
Tom McPhail, head of pensions research at the firm, said the Treasury stood to gain a tax windfall of £1.6bn based on a median pot of £29,000.
He noted that only 38% of those polled could accurately state how much tax would be deducted from a medium-sized pension pot, while only 6% could accurately predict the tax take that would be applied to large pension pots.
McPhail added: 'Whilst we support the basic principles behind the government's reforms, the speed and complexity of these changes mean that a lot of [savers] are going to paying unnecessarily large amounts of tax to the government.
'The chancellor has effectively engineered a tax windfall for the government from unsuspecting pension investors.'
He said the government needed to urgently 'think again' about how to effectively regulate these new freedoms.
'We want investors to take responsibility for and to engage with their savings but we also don't want them paying unnecessary tax bills or running out of money.'
The poll was conducted by Ipsos Mori.