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Gov't unveils 26 March launch date for 120% drawdown limit

by Alex Steger on Jan 17, 2013 at 15:45

The new drawdown limit of 120% will be introduced from 26 March, the government has revealed.

Chancellor George Osborne (pictured) announced plans to return the limit for capped drawdown to 120% of the Government Actuary's Department (GAD) rate in his Autumn Statement in December 2012, but gave no date for the change.

In April 2011 the government changed the drawdown limit from 120% of the GAD rate, reducing it to 100%.

Prior to this, individuals could take 120% of the income level set by GAD. This was reduced to 100% in order to prevent investors from depleting their savings too quickly.

The move to reinstate the 20% uplift at the end of last year followed growing pressure from pension providers and MPs, who received complaints from retirees hit by cuts of up to 50% in their income as the GAD rate tracked annuity rates downward.

In November New Model Adviser® reported the government was considering changes to the drawdown regime with an announcement set to follow in the Autumn Statement.

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7 comments so far. Why not have your say?

One has to ask the question why such a long time after the announcement?

What is the delay as this could be implemented with nearly immediate effect and reduce the pain to people between now and March

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Does anyone know how providers are going to be allowed to uplift pensions? Will the pensioner be entitled to request the uplift and be paid on current income levels? Will the pensioner need a full valuation and review? How many providers are going to be able to ensure any uplift is paid prior to tax year end?

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This is good news - primarily for clients who sufferred a big drop in income, but also I cant recall when a government actually listened and acted on something this (relatively) quickly!

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"I cant recall when a government actually listened and acted on something this (relatively) quickly! "

The "power of the grey vote" I would suggest. This can only grow IMO especially with vocal advocates like Janet Street Porter well able to wipe the floor with the opposition.

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@ Michael Brown - "One has to ask the question why such a long time after the announcement?".

Think you're having a serious attack of short-termism, isn't it?

Less than four months after an announcement of a change to drawdown income requiring procedures to be drawn up and providers to change IT and documentation - if it's done by 26th March someone deserves a medal! (probably not Boy George, though).

I think gg has it right - grey voter power, even if Janet Street Pensioner refuses to go grey just yet.

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MoK

You missed the point. Why not give the date at the announcement and not over a month later?

Contacts i have within the industry inform me that this was going to happen and wheels had been put in motion. The delay in the date screwed it for them!

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The Other Side

Jan 18, 2013 at 14:57

Surely though, if people are that desperate to take 120% GAD, then they can't have much else to rely on for retirement?

Yes 120% GAD return will ease the short term income pain, but unless you have an incredibly impressive portfolio to keeep up the growth rate whilst stripping that level of income, then the client will be in for an even worse level of income in 3 years time.

Clients need to look at other options if their income is that sensitive, such as securing what they can at this time.

Don't get me wrong, drawdown has it's place, and some people do just want to strip out as much as possible, but if that is the case, why not secure the MIR in the first place?

Just a thought.....

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