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Drawdown double whammy

Investors face lower retirement income if they move their entire pension pot into income drawdown, says Skandia.

It says the double whammy of turbulent market conditions and low interest rates, which have seen gilt yields fall, is likely to cut the amount of income drawdown that investors can take.

Gilt yields are used to calculate maximum income levels for drawdown contracts – the February figure of 3.75 per cent is the lowest since drawdown was introduced in 1995 and the figure for March is only slightly better at 4 per cent.

But Skandia says advisers can help their clients get higher income levels – potentially up to 6 per cent – by leaving a small amount of money unvested in their pension fund.

This could enable investors to use the “additional designation” option which allows them to move the remaining money into drawdown when investment markets or gilt yields improve.

Head of tax and financial planning Colin Jelley says: “Careful planning could ensure clients entering drawdown now can also benefit from higher income allowances in future if interest rates and gilt yields increase to their previous levels.”


54% Repo rise not as bad as feared

Repossessions rose by 54 per cent last year to 40,000 from 25,900 in the previous year, according to figures from the Council of Mortgage Lenders.

The name game

The reason that I prefer the wonderful world of investment ahead of any other area of personal finance is that it is the place where, after a punter has shelled out on their mortgage, pension and whatever elements of protection float their and their adviser’s respective boats, they can go and try and make some money rather than spend it. I am aware that this may be a minority view at present.


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