The Association of British Insurers is preparing to lobby the Government to ease the restrictions on capped drawdown as savers face large falls in annual income limits.
Capped drawdown was introduced as part of the Government’s reforms to abolish compulsory annuitisation at age 75.
Following the changes, which came into force in April last year, the maximum amount a person in capped drawdown can take as income was reduced from 120 per cent of the equivalent GAD annuity rate to 100 per cent.
This, coupled with plummeting gilt yields, has dramatically reduced the income that savers are able to take each year.
The ABI says it is talking to members about the issue and intends to launch formal discussions with the Government.
A spokesman says: “We will be discussing this issue with members to agree a common stance. We have put this on the Government’s radar but we have not yet entered formal discussions, pending the formulation of policy after consulting members.”
LV= managing director of retirement solutions John Perks says: “The GAD caps have created some income issues for people. Many have U-shaped income needs in retirement and want to initially take higher income but at the moment that is being constrained. We are having discussions with the ABI and other bodies on whether there is any ability to relax the rulings.”
In January, Labour Shadow Treasury financial secretary Chris Leslie urged the Government to set up a review to explore solutions to falling income levels for those entering retirement.
AJ Bell marketing director Billy Mackay says: “We want the Government to undertake a fundamental review of drawdown and look again at the link between drawdown and gilt yields.”