Investors in race against time to retain 120% GAD rates


IFAs face a race against time if they want to lock clients into the 120 per cent GAD income rates for the next five years, Suffolk Life says.

Treasury reforms ending compulsory annuitisation come into force in 12 days time. Under the new rules investors entering drawdown for the first time from April 6 onwards will have their maximum income calculated using 100 per cent of the GAD rate.

Providers often split pension pots into ‘units’, with each unit representing a fraction of the total fund. Suffolk Life, for example, splits its plans into 1,000 units.

Pensions technical manager Claire Brooks says clients could only need to crystallise one of those units to secure 120 per cent GAD rate for five years.

She says: “There are still opportunities for advisers to help their clients. If a client wants to take benefits now whilst in the process of moving providers, it may be possible to crystallise just one unit.

“Depending on the way in which the provider administers partially drawn plans this could mean that as they crystallise further units the limits will be recalculated using the 120 per cent of GAD rate instead of 100 per cent of GAD.”

A J Bell marketing director Billy MacKay (pictured) says: “The wording of the rules as they stand allows investors to lock themselves into the higher 120 per cent GAD figure for five more years by moving part of their pension into drawdown before April 6.”