The maximum amount women are able to withdraw from their pension every year using drawdown could increase by 8% following a Revenue and Customs decision yesterday.
R&C confirmed that gender neutral income factors will apply to capped income withdrawals from December 21 2012. This means the rate used to calculate the top limit on the income women can take from her pension each year will be based on male life expectancy rates.
As men tend to have a lower life expectancy than women, the amount of income they can withdraw from their pension every year if they opt for a drawdown rather than an annuity has tended to be higher than for women.
According to Skandia, the jump could amount to 8.2% for women aged 65, who would previously be able to drawdown a maximum of £4,900 a year from a pension pot of £100,000 but, after December 21, will be able to drawdown £5,300.
Adrian Walker, pension expert at the investment company, said: 'The fact that R&C has taken this step is an interesting move, and one which will significantly benefit females taking the capped income withdrawal route.
'Maximum income levels have been adversely impacted in recent months due to the record low gilt yields and volatile market conditions, so this will be a welcome relief for many females.'
Skandia noted that the full impact of the decision on the pension market was yet to be seen, with annuities also being caught by the gender neutral rules. But it added that with annuities the final income rates were likely to gravitate towards those available for women and not men, meaning women were unlikely to see any significant improvement in annuity terms.
