Government rejects calls to increase drawdown income limits
The Government has rejected calls to increase the pension income available through drawdown by restoring the 120 per cent GAD limit.
In a letter responding to AJ Bell chief executive Andy Bell, Treasury financial secretary Mark Hoban also rejects calls for a review of the way drawdown income is calculated using gilt yields.
Hoban says lowering the GAD limit to 100 per cent was an essential part of the Government’s recent reforms, introduced in April, which scrapped the effective obligation to annuitise at 75.
Bell’s original letter urged Hoban to “immediately re-instate” the 120 per cent calculation as gilt yields, which are also used to calculate maximum drawdown income, continue to tumble.
He is also calling for a policy review to determine whether “slavishly following gilt yields and actuarial principles” remains the most appropriate way to set drawdown limits.
In July, Legal & General pensions strategy director Adrian Boulding criticised the Treasury’s decision to cut the maximum pension income that can be taken under capped drawdown.
However, in August Partnership chief executive Steve Groves warned policymakers that under the current rules there is a significant risk that large numbers of people in capped drawdown will exhaust their pension fund early.