Insurers and Govt hold talks over pension drawdown reform
Insurers have held talks with Treasury officials about reforming pension drawdown rules so people with medical conditions can take extra income in retirement.
Annuity providers can currently offer customers a better rate if they have a health condition or lifestyle that reduces their life expectancy.
But people who go into drawdown are subject to a strict annual income limit of 120 per cent of the equivalent GAD annuity rate unless they have secure pension income of more than £20,000. This limit cannot be increased, even if someone suffers from an illness that reduces their life expectancy.
Money Marketing understands providers have held talks with the Treasury about the practicalities of changing these rules ahead of the Budget.
Standard Life head of customer income Alastair Black says: “The drawdown rules say the maximum you can take from drawdown is roughly the same as you could get from an annuity.
“At the moment that refers to a conventional annuity, so it would not be a huge step to say if you have an impaired life then the amount you can take from drawdown should be linked to an impaired life annuity rate.
“There would either need to be a minor change in the law or a change in the way the law is interpreted by the industry.”
Chase de Vere head of communications Patrick Connolly says: “This sounds sensible but unless people take proper financial advice the danger is they would run down their fund too quickly.”