Income Drawdown: GAD rate rises again

Posted on March 30th, 2012 | Categories - News

The maximum income available from Capped Income Drawdown will rise again from 1st April.

The new GAD (Government Actuary’s Department) rate will rise by 0.25% to 2.75% from the start of next month.

This is the third month in a row that the GAD rate, which dictates the maximum income available from an Income Drawdown contract, has risen. The rate fell to its lowest point of 2.25% in February of this year and some retirement experts were concerned that it would drop below the psychological 2% barrier; however this risk of this has seemingly been averted.

Relief for Income Drawdown investors

The news will come as a relief for Capped Income Drawdown investors due a mandatory review in the near future and indeed would be retirees considering Income Drawdown as an alternative to an Annuity.

The maximum income available from a Capped Drawdown plan must be reviewed every three years for people under the age of 75 and yearly for those older than 75.

Retirees who have recently had mandatory reviews, have seen the maximum income allowable fall considerably as a result of lower GAD rates, which have dropped due to falling gilt yields.

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As any pension Annuity calculator will tell you, falling gilt yields have also pushed down Annuity rates over recent months.

However Annuity rates have shown signs of stabilising during the first three months of this year and it looks as though there may be some relief on the horizon for Income Drawdown investors too.

Flexible Drawdown alternative

Retirement experts point out that for those people who satisfy the Minimum Income Requirement (MIR) of £20,000 per year from guaranteed sources, Flexible Drawdown offers an alternative to Capped Drawdown and the restrictions of GAD rates.

Our team of Independent Financial Advisers in Nottingham are experienced in developing retirement income strategies for clients the length and breadth of the UK. If you are approaching retirement and would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email info@investmentsense.co.uk