The Conservatives have promised to scrap the compulsion for pension savers to buy an annuity by the age of 75.

In a briefing document entitled A New Economic Model, published last week, the shadow chancellor, George Osborne, outlines the ways the Tories plan to boost savings in the UK.

The paper also suggests raising the threshold for stamp duty on property purchases to £250,000 and to restore the link between the state pension and average earnings.

An annuity — an income for life purchased from an insurance company — is generally considered the safest way to take benefits from a pension fund. About 450,000 people buy them each year.

However, as annuity returns have fallen due to low interest rates and increasing longevity, savers have started resisting them and many have started moving their pensions offshore in an attempt to escape the rules.

In 1994, a 65-year-old man could have bought annuity income of about £11,450 with a £100,000 pension pot. Today, he would receive about £6,250 a year.

Andy Bell, chief executive of pension provider AJ Bell, said: “This [scrapping the compulsion to buy an annuity] will help to quell the exodus of UK pension funds migrating offshore at the rate of £1m a day.”

Kevin LeGrand at Buck Consultants said: “Compulsory annuitisation is a hangover from bygone days when people’s retirements were shorter, they had less money to play with, less flexibility and fewer financial opportunities.”

Tom McPhail, head of pensions research at Hargreaves Lansdown, the adviser, added: “There is no decent justification for forcing investors to buy an annuity. There are currently about 450,000 people aged 74 and the best part of 2.5m between the ages of 70 and 74. A fair proportion of them will not want to buy an annuity. Ever.”

He said, however, that most people will still benefit from buying an annuity. About 88% of pension funds are worth less than £50,000 at retirement age and annuities are most efficient for smaller funds.

Billy Burrows, partner at Burrows & Cummins, the annuity experts, warned savers not to take unnecessary risks with their pension funds.

He said: “I have long argued that the compulsion to buy an annuity should be scrapped. However, this does not take away the argument for buying annuities as they are the only policy that pays a guaranteed income for life.

“The grass on the drawdown side of the fence may look greener but it really isn’t, as witnessed by those who have lost out in the aftermath of the credit crunch.”