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Archived Annuities News / Income Drawdown News

What's happening in the world of pensions

News and articles about annuities, pensions and income drawdown


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Pensions Industry calls review of drawdown limits

Representatives from the pensions industry are calling for new drawdown limits to be reviewed, after some pensioners saw the amount they can take from their retirement funds drop by as much as 50%.

Drawdown arrangements allow pensioners to keep their pension fund while still enjoying an annual income, and around 400,000 pensioners are said to have this type of income arrangement.

Under drawdown, the maximum annual income is determined by rules from the Government Actuary’s Department, which link this figure to the yield on a 15-year gilt – the ‘GAD’ rate – at the time income is first drawn.

This is then fixed until it is reviewed after three years. New rules introduced in April last year reduced this cap from 120% of GAD to 100%.

Last Friday the Association of Member-Directed Pension Schemes, an organisation representing companies that provide income drawdown arrangements to retirees and includes providers such as Liverpool Victoria and Standard Life, met with the Treasury to prompt the government to reconsider this cap, arguing that it is only adding to pensioners’ money woes.

Andrew Roberts, a partner at pensions consultant Barnett Waddingham, which headed the meeting, said:

“The Government has to bend on this issue as a matter of urgency. Pensioners who saved diligently throughout their working lives are hurting and are being penalised as a result of ill-conceived rule changes. 

“The changes just don’t make sense. It’s not as if these people are pension-poor. They just aren’t being allowed to draw sufficient income.”
Five years ago, a 60-year-old man with a £100,000 pension fund would have been allowed to take a maximum annual income of £7,800 under drawdown. Today this figure has dropped by 41% to £4,600.

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