The maximum income that can be taken from income drawdown and fixed term annuities the GAD rate will remain at 3% in May, it has been announced.
This is the first time the rate has been set by the Government Actuary Department since the range of pension reforms announced in last month's Budget, where Chancellor George Osborne revealed that from next April there will no longer be any restrictions on how individuals over 55 could access their pension pots.
Under the current system, income drawdown rates allow people to withdraw an income from their pension pot each year, but keep the remainder invested. The rate set by the GAD department, with personal drawdown entitlement also calculated using annuity rates.
In addition, the annual income cap retirees can draw down has been raised so they can now withdraw 150% GAD, instead of the previous 120% GAD. Subsequently, the average 65 year-old with £100,000 invested would now have their maximum income cap raised to £8,850.
Publishing the details of the GAD rate, financial advisors My Pension Expert also said the Budget had made changes to the minimum income requirement needed to apply for flexible drawdown, reducing it from £20,000 to £12,000.
While these measures would reward greater flexibility to anyone considering drawdown, the reforms should be treated with a degree of caution, the firm stated.
'There is an obvious appeal to taking a higher income in the years immediately after retirement - when health is likely to be better - doing so risks eroding a fund's future growth potential and could even eat into the capital.'
