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Advisers back radical pensions drawdown overhaul

Advisers have welcomed A J Bell’s proposal for a radical overhaul of the pensions drawdown regime.

Currently, people in capped drawdown are allowed to take 100 per cent of the equivalent GAD annuity rate. This method is largely based on 15-year gilt yields, which have fallen substantially in recent years.

A J Bell chief executive Andy Bell (pictured) says the Government should introduce a new regime based on the size of an individual’s fund and their age.

Under Bell’s proposals, maximum drawdown income for someone with a pension worth less than £200,000 would increase as they got older. So, someone who was aged between 55 and 59 would be able to take up to 5 per cent of their fund each year, while someone aged between 60 and 69 would be able to take 6 per cent.

The limit would be capped at 9 per cent for someone aged over 90.

Anyone with a pension pot worth more than £200,000 would be able to take an annual income of 10 per cent of the excess from their fund, in addition to the ‘basic’ drawdown allowance.

Forty Two Wealth Management Partner Alan Dick says: “The current regime is unnecessarily complex. Maximum income is based on gilt yields which are impacted by short-term factors and are unpredictable, so anything that can address that problem would be a very good thing.”

Syndaxi Chartered Financial Planners managing director Robert Reid says: “It is good to see some radical thinking on drawdown because the current system is not working. I think a final solution would need to take account of the volatility of the client’s investment mix.”


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There is one comment at the moment, we would love to hear your opinion too.

  1. How about a Retirement Income Bond?

    1. The life of the pension fund holder would be assessed at outset by underwriting.

    2. Allowing for assumed investment growth of, say, 5% p.a. the level of income permitted would be geared to deplete the fund fully over his remaining lifetime.

    3. The plan would include an insurance element against early fund burn-out.

    4. On death, any unspent funds would be allowed to pass free of tax into PP’s for the next generation.

    Simple, practical, value for money, no annuity rates trap and no punitive death tax. On what grounds might the government reasonably reject such a proposal?

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