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Savers handed drawdown boost as GAD rate hits 3.25%

Savers in drawdown have been handed a boost after the Government confirmed the rate used to calculate the maximum annual income someone can take in retirement will increase from 3 per cent to 3.25 per cent.

The increase, in effect from January, means the GAD rate has risen from 2.25 per cent to 3.25 per cent in the past 12 months.

LV= says a 65-year-old with a £100,000 pension pot will be able to receive an extra £240 a year in retirement income.

LV= head of pensions and investments Ray Chinn says: “One of the reasons clients use income drawdown is because it allows them to turn the income tap on and off. For clients that still work this is extremely useful as it means they can access their fund but can drip-feed the income so they do not end up in a higher tax bracket.

“In January, a 65-year-old income drawdown client with a £100,000 fund will be able to take £7,320 rather than £7,080 from their fund.”

Investment Sense marketing and relationship manager Phillip Bray says: “This is potentially good news for new entrants to income drawdown in January.”

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