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A J Bell urges Treasury to rethink capped drawdown rules

A J Bell chief executive Andy Bell has written to Treasury financial secretary Mark Hoban calling for an overhaul of the Government’s pension drawdown rules.

Under the new capped drawdown regime, which came into force from April 6, investors are allowed to take a maximum pension income of 100 per cent of the equivalent GAD annuity rate.

Previously, savers had been allowed to take up to 120 per cent of GAD.

Bell (pictured) is urging 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.

He says: “The Government introduced drawdown to provide individuals with flexibility, but introduced annual income limits and regular income review to prevent inappropriate fund depletion.

“I would respectfully suggest that the recent changes to income limits have tipped the balance too far in favour of downside protection.

“I would also encourage the Government to carry out an immediate policy review as to 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.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. I agree.

    The introduction of USP then the reintroduction of drawdown is not exactly simplification in action.

  2. You are wasting your breath!

    Your recommendation/comments will simply fall on deaf ears in the case of Mark Hoban

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