Up to 200,000 people are set to cash in their pension pots all in one go next year, according to new research.
From April 2015, all those over the age of 55 will have the freedom to take all their savings out of their pension fund, if they wish.
As many as 12% of those with pension savings will do so, says the investment adviser Hargreaves Lansdown.
In response, the Treasury insisted that people should be free to do what they like with their pensions.
If the estimates prove accurate, the government could be in line for a tax windfall of up to £1.6bn.
But the research also showed widespread ignorance on how much tax is payable on such withdrawals.
Only just over a third of those questioned in a survey knew how much tax would be deducted if they cashed in a medium-sized pension pot.
Those with larger savings were even less likely to know what their tax bill would be.
More than 1,000 adults with defined-contribution scheme pensions were questioned by Ipsos Mori for the research.