Charlie McCreevy's Budget Day announcement that he was increasing the pensions options open to the self-employed took many by surprise.

But it has been nearly three months since the new legislation took effect and still no new products have appeared on the market.

However, behind the scenes both the Revenue Commissioners and the life assurance industry have been busy drafting and clarifying the rules governing the new legislation.

The recent publication by the Revenue of a booklet outlining the tax implications of the new legislation has now provided the basic framework necessary for the development of products, allowing industry players to focus on the task at hand.

The new pension legislation removes the obligation for the self-employed and directors of family companies to purchase a retirement annuity. Instead, it allows them to take 25 per cent of their pension fund as a tax-free lump sum and to invest the balance in other financial products.

Those with a guaranteed income of less than £10,000 per annum are obliged to put a minimum of £50,000 in an Approved Minimum Retirement Fund (AMRF) from which the capital cannot be withdrawn until they are 75 years of age.

But the balance may be invested in an Approved Retirement Fund (ARF) while those with an income of at least £10,000 per annum may invest their entire retirement fund in such a product provided it is offered by a qualifying fund manager. These include banks, building societies, credit unions, life assurance companies and the Post Office.

The legislation is silent on the investments which an ARF may or may not make but investment bonds, property, stocks and shares, life assurance, deposits and even the traditional annuity are among the options likely to emerge. According to the Revenue Commissioners, the amount originally invested in an AMRF or an ARF is treated as part of your income for the year in which it is withdrawn and is taxed accordingly. Investment income or gains on the capital are taxed in the same fashion as normal. For example, Deposit Interest Retention Tax (DIRT) will be deducted at source where the money is invested in a deposit account. If the funds are invested in stocks and shares, you will be taxed on any dividends received and on any capital gains on the sale of the stocks and shares.

Among the ARF options currently under consideration by the life assurance companies are investment bonds which would put investors' funds into unit-linked products where the tax would be deducted and paid at source by the fund. However, some people may prefer to go down the traditional bricks and mortar route and use the money in the ARF to buy an investment property from which they can then derive income which is taxed as normal income at the marginal rate of tax.

Stocks and shares are another option for investors seeking high returns although they may have to look at options such as bed-and-breakfasting the shares to allow them to derive an income by realising their gains, on which they would then pay capital gains tax at 20 per cent, while hanging onto their shares.

Annuities will remain an option but if fewer people go down this route, their cost is likely to rise further. However, many in the industry believe the changing environment could lead to a restructuring of annuity products to make them more attractive.

More flexible annuities, including equity-based products which would deliver higher returns, are among the options being discussed in the industry. Another element life companies may have to look at is addressing what is perceived as the greatest inequity in such policies, that they die with you.

When considering how to invest their pension fund, people will need to consider not just the investment returns they will get and taxation, but issues such as the inheritance implications as the ARF is your money and forms part of your estate.

Another crucial factor in deciding what to do will be to ensure that the ARF matches a person's life expectancy and does not run out. "People going the ARF route may have to look at it every year and consider whether it makes sense at any stage to buy an annuity," says Ms Alison Coffey, pensions product manager with Norwich Union.

Meanwhile, those who have recently retired or are about to do so and are keen to take advantage of their new found freedom in the pensions domain are limited in their options.

The European Pensioneer Trustee Company, a specialist retirement fund management company, will design customised ARFs for those with substantial pension funds.

Managing director Mr John Mulholland says that those retiring can now consider a wide range of assets - such as commercial property, residential property, stocks and shares or even property elsewhere in the European Union.

Rather than dying with the pensioner, such assets are likely to increase in value during the client's life time and can be willed to spouse, children or grandchildren.

Those with smaller funds have little option, however, but to take their tax-free lump sum and leave the balance on deposit until new products start to appear from the life assurance industry.

Although the broad tax treatment of the new options is now clear, discussions are continuing between the Revenue and the Irish Insurance Federation (IIF) on certain technical details and guidance notes on certain aspects may be necessary before the finer points are clarified.

"We have nearly sorted out all the details. Things are moving along," says Ms Jennifer Hoban, life assurance manager with the IIF. She says that it is up to individual member-companies what priority they attach to the introduction of new products. She notes that while some of the big players in the pension market are likely to be quick off the mark, other firms may want to see all the tax implications nailed down before proceeding.

Norwich Union is already working on a prototype ARF and hopes to be in a position to unveil it soon. A spokesman for Irish Life said a huge amount of work was being done in the area and it could have something on the market by the end of July.

The changes are open only to the self-employed and proprietary directors, defined as those controlling more than 20 per cent of the voting rights in a company or in a firm's parent company. But the new products will be of considerable interest to other groups given the possibility that the legislation could be extended to all categories of pensioner eventually.

Further information on the tax rules for the new pension options is available from your local tax office or by contacting the Central Telephone Information Office at 01-878 0000.