AJ Bell gains overwhelming support for drawdown reform

This all seems a bit much....I can see why they have reduced the limit from 120% to 100% as people were draining their funds too quickly - if the limits are being cut so dramatically it probably means that the client is taking too much income and it's unsustainable.

The IFA needs to look at themselves and warn the client if it is happening, and if they were totally on top of things they would be changing income payments each year not allowing 5 years at 120% unless the fund was growing at greater than 10% pa

QE has distorted the market and I'm sure that many pensioners will be much poorer because of it. Just recalculated what my income would be now - 48% less than I was able to obtain just over 6 months ago!

If incomes drop too low, then it will only encourage people to take on higher risk investments to try to make up the shortfall. This would potentially be more disasterous than a gradual erosion of a pension fund.

Income Drawdown limits should be linked to Gilt Yields and also limited to 100% of GAD.

IF the drawdown fund achieves the higher returns expected from equity investments, then the benefits of this can be passed on to the investor through a rising income. This is a perfectly sound financial planning approach.

Setting the withdrawal limit at more than 100% of GAD:

a) pre-assumes higher investment returns, which may or may not materialise.

b) creates the impression that Income Drawdown offers more income than an annuity, which can mislead clients and be exploited by salesmen.

c) deters clients from ever annuitising, once they have started drawdown, as Income Withdrawals will always be higher than the annuity they can buy, even if the fund is depleting too quickly because of poor investment returns and/or excessive withdrawals.

I think AJ Bell and other drawdown providers are finding that fewer people are choosing drawdown, because they can get the same initial income from an annuity without any investment risk. That tells me that a lot of clients were previously choosing drawdown, mainly because of the higher initial income, which is dubious to say the least.

As much as overdrawing income if permitted can deplete a fund too quickly, restrictions that prevent withdrawal at a reasonable rate can result in an excess fund on death that will be taxed at 55%, enriching the Treasury after impoverishing the pensioner owner.

What silliness permits no more that 4% or 5% withdrawal from a fund that may be growing at a substantially higher rate, whilst at the same time allowing 7% or 8% withdrawal from a fund with a negative rate of growth because of losses? This is what can happen under the current new rules.

Common sense should prevail, and the rules should permit adjustments that suit the individual, not straight-jacket all. For example, someone of 90 should be able to draw-down at a rate that would exhaust his fund at, say, age 105. And it wouldn't be too costly at advanced ages to provide insurance against that: so few would call on it, given appropriate checks and balances, that the cost would not need to be too high.

(Unless of course, greedy insurance companies who are making good profits from annuities - and profits can be disguised as 'expenses' in many ways - deliberately overcharge to push people towards these annuities.)

A retirement income product with an insured guarantee against early fund burn-out would solve much of this debate at a stroke and the shackle to these wretched GAD Rates could be safely consigned to history once and for all. It's almost as if the government is wilfully resistant to proposals for people to get more retirement income out of their pension funds. And it [the government] wonders why people are turned off retirement saving. Idiots!

"Turkeys gain overwhelming support for Christmas reform".

Research supports vested interests claim! Thats a first.

Forget the vested interests of the SIPP providers. I am a SIPP pensioner.

There is no logic in removing the 20% uplift. Equally there was no logic in introducing it.

SIPPs give you a chance to beat the professional investors - the insurance companies with their overheads and the investment manager's bonuses.

I'm no financial genius and I don't take risks but currently my portfolio is 30% larger than when I started making a draw down 4 1/2 years ago despite taking the maximum permitted draw down. My dividends are 3.91% of current value (5.21% of original fund) and the annual growth inc. dividends is 17.13% (22.83% of original fund). If I only achieved the GAD rate I would be in a sorry state so from my point of view all the arguments for the new rules fall at the start. The arguments about the rules benefit me by not making me take an annuity at 75 is an excuse rather than a reason.

So I agree with Andrew Baker and Julian Stevens. To restrict drawn down to the GAD rate is the cautious approach I'd expect from the local bank manager not from an investment guru.