Providers are split over the Treasury’s decision not to reform income drawdown rules in the Autumn Statement.
Last week, the Treasury said the way income withdrawal rates are formulated will not be changed after it had ordered a review in the March Budget.
The Association of British Insurers had called for the Government Actuary Department maximum used to set drawdown rates to be calculated using a mixture of long-term corporate bond yields and long-term gilt yields. The GAD maximum is currently based on 15-year gilt yields.
The Treasury says the review found withdrawal rates are a “reasonable match” to annuity rates and the way they are formulated does not need to change.
Legal & General pensions strategy director Adrian Boulding says: “The pressure on drawdown will not go away because savers will not be happy if they have a retirement pot that is going up faster than they can draw the money out.
“The matter is not closed and there is still a lot of pressure on decumulation because what we have now is not right. Just because the Treasury has not taken this opportunity does not mean the case is closed.”
But Aviva head of policy John Lawson says: “There is no obvious advantage in adding complexity to the GAD limit by trying to calculate it according to a mix of long corporate and government bond data to mimic annuities.”
Skandia retirement planning manager Adrian Walker says: “I am glad there has been no minor tinkering with the underlying income factor tables as a result of reviewing against the gender neutral annuity market post December 2012.
“This will give a degree of certainty for clients using capped drawdown, given that the next formal GAD review of drawdown will not be due until April 2016.”
In April this year, the Government increased the maximum amount a person in capped drawdown can take as income from 100 per cent to 120 per cent of the equivalent GAD annuity rate. It had initially reduced it from 120 per cent to 100 per cent in April 2011.
The Department of Work and Pensions is setting up a decumulation taskforce in the coming months to look at new ways to take money out of your pension.
Last year, Money Marketing revealed a small FCA thematic review showing two-thirds of clients were not receiving suitable drawdown advice.