People drawing an income directly from their pension (Income Drawdown) are expected to benefit from an increase to the maximum income that can be taken from a pension in drawdown. The Government expects about 500,000 pensioners to benefit from this change.
Current rules specify that the maximum income that can be drawn from a pension is 100% of the GAD rate (the rate was reduced from 120% April 2011). From 26th March the limit will be raised to 120% of the GAD rate, effectively allowing for a 20% increase in retirement income. Our Drawdown Calculator will be revised to show the higher limit when the legislation comes into effect but here’s a link to a preview of how income and fund values might be affected if income is drawn at the higher maximum rate.
Those people considering drawdown and would like to take advantage of the higher limit may want to delay their move until 26th March. Retirees already utilising drawdown will be able to move to the higher limit on the first anniversary of when their reference period commenced following 26th March; depending on the reference period they may have to wait up to 12 months before they can switch to the higher rate. It is possible to bring forward the reference period but the drawdown provider may charge to do this.
For further information about the changes you should speak to your financial adviser.