The radical shake-up of pensions announced this week by Chancellor George Osborne might undermine his own government's initiative to drive £25 billion of insurance money into funding long-term infrastructure projects, industry insiders warned yesterday.

Announcing the radical reforms in Wednesday's Budget, Osborne said his purpose was clear: "No one will have to buy an annuity." The markets took him at his word, sending the share prices of insurers who sell annuities tumbling.