According to the Telegraph, Friends Life customers will now have a more limited range of options: cash in their entire pension (and incur the tax charge), swap the whole fund for a lifetime annuity income, or transfer to another provider.
Friends Life initially told customers that their applications to make partial withdrawals had been "delayed", but thousands have received letters this week telling them that its decision to offer flexible drawdown has been reversed.
The decision will not affect customers of Aviva, who acquired Friends Life in December.
A spokesman for Friends Life said it could no longer offer flexible drawdown because of the "older and complex nature" of its pension books, which would require "a lot of manual and time consuming work", adding:
"We apologise to those customers who wish to partially withdraw their savings through the new pension freedoms as we are not offering this service at the moment.
"We are planning to offer partial withdrawals in due course."
