One of the more intriguing one-liners in Minister McCreevy's Budget speech last month was the reference to "the self-employed having more control of their pension funds".

We await clarification of this remark with the publication of the Finance Bill, but it is interesting to speculate what this may mean to holders of this type of pension plan - or indeed to others investing for their retirement.

At the moment, the self-employed and those who do have access to, or choose (where they can) not to join a company pension scheme, can take out a personal pension, known as a retirement annuity contract (or RAC for short).

When you come to draw the benefits under an RAC, you can take up to a quarter of your accumulated fund at retirement as of a tax-free lump sum. The rest, however, must be used to buy a pension (also called an annuity) from an insurance company. With interest rates having dropped through the floor, this makes buying pensions a very expensive exercise, as annuity rates are linked to interest rates.

The result is that many people coming up to retirement are getting less and less pension for their money. For example, four years ago, a 65 old man would have received a pension of £1,180 per year for every £10,000 he spent. Two years ago this had dropped to £1,066 per annum and today he would only get £900 per annum. That is a drop of 24 per cent over the last four years.

The problem about this method of providing for retirement is that it is inflexible - once you buy your pension that is it - you cannot change what you've done, you are locked in forever. Also, if you are unlucky enough to die early, the insurance company keeps the money you have paid. One of the solutions to this unfortunate state of affairs would be to introduce a bank-account type method of drawing your pension. Instead of paying your total fund over to an insurance company when you retire, you keep it invested and draw on it as you need the cash.

Your account is available for you to draw on until you die when it is then available to your spouse to drawn on in a similar way until he or she dies. At that time, or if there is no spouse, the residual fund can be passed to other beneficiaries as a cash lump sum less a tax charge. So you always retain control of the money. You either spend it while you are living or pass it on to your dependants.

This is the system which has already been introduced in the UK and is known as "income draw-down". While it has the stated advantages, it needs to be handled with care as things can go very badly wrong.

There are concerns that, although the level of income is flexible, people are drawing too much and will erode their account too quickly, leaving them with little to live on in their later years. This is despite the fact that the income level has to be between an upper and lower limit set by the Government.

What is more perturbing, however, is the capacity for things to go spectacularly wrong if the investment of your account is not handled properly. Significant expertise will be required to avoid severe depletion of funds during a bear market. In the hands of an incompetent adviser, a lifetime of savings could rapidly disappear.

So why then are we thinking about this just now? Well, it does seem crazy to spend a lifetime saving for retirement just to have one big bet on interest rates when you come to retire. Remember, when you buy a pension - you are locked in to the rates at the time you buy.

The alternative brings control over the capital accumulated and the chance of a higher income but has risks. Proposed legislation should take these issues into account and the State will have to ensure that proper safeguards are put in place to protect your savings.

The potential for a better retirement is there, together with the retention of accumulated wealth within your family group. But why restrict it only to the self-employed? People with company arrangements should not be denied the same advantages. In any event, we will need a radical rethink on how we achieve these desirable goals.

Alan Hardie is an actuary with PricewaterhouseCoopers