Partnership warns Treasury of capped drawdown risk


Partnership has warned the Treasury there is a significant risk that large numbers of people in capped drawdown will exhaust their pension funds prematurely.

Under the capped drawdown regime, which came into force in April, the need to annuitise at 75 or move into alternatively secured pension was scrapped while the maximum amount of pension income allowed was reduced from 120 per cent of GAD rates to 100 per cent.

Partnership has submitted a range of calculations to the Treasury, suggesting people will run out of funds if they draw down the maximum each year. It calculates someone taking 100 per cent income a year from age 60 has a 40 per cent chance of depleting their fund by 85.

Chief executive Steve Groves says: “This is a big issue because it goes to the heart of confidence in public saving. If a significant proportion of people start running out of money because they have drawn what the Government suggested was a safe level of income, they or their children will challenge the advice that was given.”

A Treasury spokesman says: “In designing the new rules the Government has had to strike a balance between allowing greater flexibility and limiting individual risk.”

MGM Advantage pensions technical manager Andrew Tully says: “Drawdown is riskier as people get older. The worry is that some people are just wandering along without really thinking about it.”