Five Questions On: Pension freedom problems

What are the problems?

If you recall, new rules came into effect in April giving people aged 55 and over the right to withdraw their cash if they want, rather than having to buy an annuity policy. More than a million people have made enquiries but thousands have been stymied, largely because of a lack of readiness for the changes among pension companies.

What have pension companies been doing?

Some have charged people for making withdrawals or for switching their savings to a rival company. Others have made their customers wait much longer than they should have for payouts – up to three months in some cases. Some people even claim they've been forced to pay up to £1,000 for financial advice if they say they want their own money.

Is it a scandal?

It could easily grow into one but the seeds of the problems were planted by the speed with which the reforms were introduced by the previous government, which was clearly keen to have the changes in place before this year's election. The big companies say they have been caught out by the haste as well as uncertainties about many aspects of the freedoms – such as the number of people wanting partial withdrawals. As a result, they say, they haven't been able to deal properly with the requests.

So are the companies in the right?

They have a responsibility to ensure people don't make expensive mistakes, especially as cashing in a pension pot could leave someone with a huge tax bill. But they have no right to charge people for switching or for taking advice. Tom McPhail at the adviser Hargreaves Lansdown said: "Insisting that investors pay hefty exit penalties, use a financial adviser that some may not need to, or jump through bureaucratic hoops is simply not reasonable."

What will happen next?

David Cameron has promised to keep a "careful eye" on the situation so there could yet be government intervention.