Other Citywire websites
Stay connected:

View the article online at http://citywire.co.uk/new-model-adviser/article/a634850

Treasury denies drawdown consultation

by William Robins on Nov 15, 2012 at 13:38

Treasury denies drawdown consultation

The Treasury has said rumours of a drawdown consultation are untrue.

Adrian Boulding, Legal & General pensions strategy director, posted on Twitter that the Treasury was set to publish a consultation on reforming drawdown rules.

However the Treasury said there were no plans for a consultation.

As Government Actuary’s Department (GAD) rates have continued to fall many capped drawdown investors have seen the amount of income they are able to take cut dramatically, sometimes by as much as 50%.

The amount of income available through drawdown contracts has fallen for many pensioners in the past couple of years due to a reduction in gilt yields and rules limiting the GAD rate to 100% for those who could not guarantee a £20,000 annual income.

Sipp provider AJ Bell recently renewed its campaign to return the GAD rate to the pre-2011 level of 120% for those on capped drawdown. The campaign received responses from a number of MPs voicing their concern about cuts to drawdown income, including pensions minister Steve Webb.

The Association of British Insurers has recommended the GAD rate be relinked from 15-year gilt yields to a mix of long-term corporate bonds and gilt yields.

6 comments so far. Why not have your say?

Julian Stevens

Nov 15, 2012 at 14:59

Scrap the annuity rates trap.

report this

Bob Donaldson

Nov 15, 2012 at 15:17

You now have the ridiculous scenario where the portfolios are yielding more income than the client can remove be it from property equities or bonds.

Yet another consultation which will take years to complete in between times clients can't remove the income.

Why can they simply not leave things alone.

report this

Jonathan Kirby

Nov 15, 2012 at 16:07

Does this actually mean that they are changing without further consultation?

If so then that would be good. Consultation would take a long time and the need is now.

Or do they mean that they aren't changing which would be bad as, as Bob says above, the funds will continue to grow despite maximum withdrawals and increases.

I have a couple of cases where the main investment is commercial property so as long as the rent is paid there is a guaranteed 'growth rate' of around 8 to 10%, yet my clients still have to accept gilt yields of 2% as a starting point.

Common sense is required here, and quick.

report this

Anthony Ward

Nov 15, 2012 at 18:10

in light of recent experience of bbc would it not of been, a good idea to check with HMRC and give them right to reply - before going to print??

report this

Nick

Nov 15, 2012 at 21:14

so it appears this is a none story and it was never going to happen!!

report this

Mike Morley

Nov 16, 2012 at 10:30

With the prospect of applying the penal 55% tax charge on unexpired funds the Treasury has every reason to limit drawdown income so that pension pots are kept at a high level. Most drawdown funds are not large enough to warrant the additional costs of Scheme Pension to circumvent the GAD trap.

report this

leave a comment

Please sign in here or register here to comment. It is free to register and only takes a minute or two.

News sponsored by:

Long time coming: is the recovery here to stay?


Click here to watch a series of sponsored interviews with Jupiter's fund managers on the UK equity market.

Today's top headlines


Sorry, this link is not
quite ready yet