The pension regime is about to undergo its most radical transformation for a generation, and anyone who fails to understand it - and makes the wrong choices - could suffer financially for the rest of their life.

The start of the financial year on Monday marks the beginning of a new era in retirement provision with the end of compulsory annuities. The idea is to give savers greater freedom and control over their savings, but for the unwary it may be a disaster.

Simon Rogerson, chief executive of Octopus Investments, said: "The upcoming pensions revolution is the biggest shake up in terms of financial planning that Britain has seen for decades."

Yet, according to the investment provider, eight out of 10 adults aren't clear on the basic facts of what is happening.

There are two main types of pension plan. A lucky few are members of workplace final salary, or defined benefit, schemes, which on retirement pay a guaranteed pension for life based on a proportion of what they earned.

However, most people nowadays belong to private or workplace money purchase, or defined contribution, schemes, which are cheaper for providers but less lucrative for members.

At retirement, these pay out a sum based on the investment performance of contributions made to the member's account. Until now, although retirees could take up to 25 per cent of their pot as a tax-free lump sum, they were legally obliged to exchange the rest for an annuity.

This one-off purchase, which could not be undone, provided a pension, calculated as an annual percentage of the remaining fund, until death.

Annuities have long been unpopular for several reasons. They are linked to interest rates at the time of purchase and the length of time the provider calculates the holder is likely to live.

Someone in good health - who is, therefore, expected to survive several decades - retiring at a time when rates were low would be stuck with this poor return for the rest of their days.

This was compounded by the fact that many people simply accepted their pension firm's annuity offer without shopping round for a better one.

Women generally got the worst rates as they tend to live longer than men, and anyone unlucky enough to die after only a few years would have made a very bad deal indeed.

Under the new rules, from the age of 55, retirees can access their entire pension pot without the obligation to buy an annuity. They can opt to take all or part of it as cash (although only 25 per cent will be tax-free), keep the money invested and draw a regular income from it, buy an annuity, or choose any combination of these.

This means everyone will be responsible for their own decisions. Louise Hanson, director of advocacy at insurance industry trade body the ABI, warned: "With greater pension freedoms and flexibility comes more responsibility to make the right choice.

"Don't be tempted to 'dash for the cash', but take time to consider carefully your options - especially as rising life expectancy means we can expect a longer retirement."

Broker TD Direct Investing says 40 per cent of investors plan to withdraw all or part of their pensions as soon as the law allows, even though 46 per cent of those over 30 admit they are not equipped to make the best decision.

Those who blow a large chunk of their cash on property, travel, new cars or gifts will be sacrificing long-term security for short-term pleasure if they are left without enough to live on. They could also be landed with a substantial tax bill.

A more sensible option might be to take an initial tax-free lump sum and put the rest into a tax-efficient drawdown plan that leaves it to grow and provide a regular income.

However, most people will need help from an independent expert to ensure this is set up so the money doesn't run out.

Vince Smith-Hughes, retirement expert at Prudential, said: "Retirement can easily last 20 years or longer, so it's important to make retirement income decisions that address the risk of outliving your savings.

"If retirees choose to draw income directly from their pension fund, whether in one big lump sum or over time, it's important they are aware of the implications on their future income and their tax liability."

Those who want a guaranteed income for life may decide buying an annuity is the wisest option after all, or they might want to combine a small annuity with a modest drawdown plan. But, again, it will be essential to get independent professional advice before committing to this course.

All sorts of people will be putting themselves forward as pension and investment experts, encouraging savers to cash in their funds or transfer out of secure final salary schemes in exchange for dubious alternatives.

Ms Hanson warned: "These reforms could make it open season for the criminals looking to cheat people out of their pension savings with too good to be true investment offers, or saying they can unlock the pension before age 55.

"Once money is transferred into a scam, you could lose all your pension pot and face a tax bill. If an offer seems too good to be true, it usually is."

For more advice on spotting scams, visit the pensions section of independent website moneyadviceservice.org.uk.

She added: "The Government's Pension Wise service (pensionwise.gov.uk) should be your first port of call to help you understand your options and make the right retirement income decision."

From April 2016, the Government wants anyone who has already bought an annuity to be able to sell it to free up some of their original cash. But they too will need to think long and hard - and get expert advice - to avoid potentially costly and far-reaching mistakes.