View more on these topics

Insurers and Govt hold talks over pension drawdown reform

Insurers have held talks with Treasury officials about reforming pension drawdown rules so people with medical conditions can take extra income in retirement.

Annuity providers can currently offer customers a better rate if they have a health condition or lifestyle that reduces their life expectancy.

But people who go into drawdown are subject to a strict annual income limit of 120 per cent of the equivalent GAD annuity rate unless they have secure pension income of more than £20,000. This limit cannot be increased, even if someone suffers from an illness that reduces their life expectancy.

Money Marketing understands providers have held talks with the Treasury about the practicalities of changing these rules ahead of the Budget.

Standard Life head of customer income Alastair Black says: “The drawdown rules say the maximum you can take from drawdown is roughly the same as you could get from an annuity.

“At the moment that refers to a conventional annuity, so it would not be a huge step to say if you have an impaired life then the amount you can take from drawdown should be linked to an impaired life annuity rate.

“There would either need to be a minor change in the law or a change in the way the law is interpreted by the industry.”

Chase de Vere head of communications Patrick Connolly says: “This sounds sensible but unless people take proper financial advice the danger is they would run down their fund too quickly.”


News and expert analysis straight to your inbox

Sign up


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

  1. Is Income DrawDown right for anybody who could get a (possibly) significantly better level of income by way of an underwritten annuity? Why are these people even talking about underwritten Income DrawDown for heaven’s sake? How many people with with serious health issues want the added costs, complexities and uncertainty of Income DrawDown anyway? It’s a complete red herring.

    Surely this highlights yet again the need for a retirement income product that’s entirely free from the shackle of annuity rates ~ a Retirement Income Bond designed to utlise fully the entire fund over the remaining underwritten lifetime of the retiree with the option for the level of income available being re-underwritten at a later date.

    These people need their heads knocked together to clear out all the techno-guff with which their thinking is so obviously addled.

  2. Alastair Black says: “The drawdown rules say the maximum you can take from drawdown is roughly the same as you could get from an annuity”.

    My understanding was that 100% GAD was supposed to be rughly equivalent to a single life conventional annuity.

    As the drawdown rules say the maximum you can take from drawdown is 120%, I would suggest that this is broadly in line with what most customers could get from an enhanced annuity.

    Any customer qualifying for a greater than 20% enhancement from an annuity is probably quite seriously ill, and in these circumstances drawdown may not be appropriate.

Leave a comment


Why register with Money Marketing ?

Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Money Marketing Events
Be the first to hear about our industry leading conferences, awards, roundtables and more.

Research and insight
Take part in and see the results of Money Marketing's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now

Having problems?

Contact us on +44 (0)20 7292 3712

Lines are open Monday to Friday 9:00am -5.00pm