The poll of 1,247 UK adults found that 12% of DC savers plan to take advantage of the pension reforms available from April.
Of those who plan to take the cash, only 38% of people knew how much tax would be paid on medium-sized pension pots, while just 6% could say how much a large pot would lose to tax.
The survey also found only 22% planned to use their pension to live on. Some 21% would have a holiday, 16% would reinvest in property and 13% planned to pay off debts.
Hargreaves Lansdown estimates the Government’s tax take on this would be between £800m and £1.6bn.
The study, published in the Times, is the first detailed examination of Chancellor George Osborne’s reforms, in which those aged over 55 can dip into their retirement savings for the first time without having to pay punitive tax rates.
Mr Osborne announced he was scrapping the current rules next April.
The Government’s own estimate puts the extra tax income in 2015/16 at only £320m, rising to £600m in 2016/17.
Hargreaves Lansdown head of pensions research Tom McPhail says:
“Whilst we support the basic principles behind the Government’s reforms, the speed and complexity of these changes mean that a lot of investors 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.
“There is an urgent need for the Government to 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 then paying unnecessary tax bills or running out of money.”
David Macmillan, Managing Director at Aegon said:
“Giving people greater flexibility over how they access their pension is a change for the good. However, based on current life expectancy figures, if you access your pension at 55 it may need to last another 30 years and it will become increasingly important to have a plan in place for how you spread your savings across retirement.
“While some people may opt to take their pension and put it in their bank account, this is likely to make sense only for those with the smallest pension pots and our research indicates the a majority of people still want a guaranteed income. When asked how they would like to take their cash from next year, 40% wanted a guaranteed regular income, while 30% wanted a combination of a cash lump sum and a regular income.”
