Investors can take more from pension drawdown plans as income yield rises to 2.75%

17th July 2013

Investors in income drawdown will be able to take more from their pots – in August income reviews – as the GAD income drawdown yield has risen to 2.75%.

This is up by 0.25% from July and, as pension company Standard Life points out, it is far above the 2% lows at the end of 2012.

It says the yield rise would boost the income a 65 year old can take from their drawdown pot by 3.5% compared to the month before. For someone with a typical £150,000 pot this could unlock another £360 of income.

Obviously this potentially means you will be taking more from your pot and, depending on returns, will reduce your capital sum faster.

Standard’s head of income solutions (the expert on drawdown) Alastair Black puts the emphasis on the flexibility this gives you. He says: “A higher income limit gives more flexibility to dial income up or down to meet changing needs, so the rising yield is great news for drawdown users.

“It’s not always taking the maximum income allowed, it’s about having the flexibility to take more income when it’s needed and to reduce it down again when it isn’t. The more room drawdown users – and their advisers – have to adapt to changing circumstances the better.”

Standard Life would, of course, like you to transfer your drawdown pot to them. It has launched a new drawdown transfer option, giving most drawdown users the ability to trigger an immediate review of the income they can take when they transfer. If you have an adviser however, it goes without saying that you should consult them before contemplating such as move.

And note some pension experts are a little worried that the increasingly liberal approach to drawdown from the regulators and the government amid concerns some people running their pots down too quickly. But it does seem you will have more flexibility in the nexth month and that must be a good thing if you are aware of what you are doing.

4 thoughts on “Investors can take more from pension drawdown plans as income yield rises to 2.75%”

  1. Noo 2 Economics says:

    The first sensible discussion of retirement age I have ever read. Every one seems to think that you enjoy excellent health until the day before you die of old age!!

    The reality is that whilst the populace live longer, they simply have a longer period of declining health and infirmity both physical and mental (alzheimers, senility etc)

    1. David Lilley says:

      Noo,
      May I just speak my mind here.
      It is not that Labour ran up debt but rather what they spent the money on. Redistribution, redistribution, redistribution was interpreted by so many as so fundamentally fair that to work for a living was a betrayal of a just principle. Millions applied for ICB and two thirds of them got it.
      ICB was a pension for life. Better paid than JSA and no interviews to attend. 200,000 teenagers took the offer. 3.5m took the offer, 12% of the workforce. 12m pensioners and 3.5m want to be pensioners.
      You take 3.5m from the workforce and you suck in 4m quest workers to do their jobs. ICB was designed to take 175,000 off the unemployment register because they had the IQ of a two year old or had no arms or legs. Labour saw the opportunity to reduce headline unemployment by putting all new applicants on ICB rather than JSA.
      We can rise the retirement age for the private sector but it has no impact on the public sector or the Glaswegien male. The former will not give up retirement at 50-60 and the latter will still have a disability free life expectancy of 61.
      We have brought the DLA numbers down to 3m but that is still 10% of the workforce claiming that they couldn’t work a day in their lives.

      1. Noo 2 Economics says:

        David I am not rising to the political issues as my comment was purely on the fantasy that most people have that you can be fully fit and active until the day before you die. The fact is, as I know from extensive pesonal experience, people start slowing down in their mid 50’s (which does not stop them from working) and then from around their mid 60’s they start suffering from physical and mental short comings which makes them inefficient as workers but still fully functional otherwise, albeit much more slowly functional. In their late 60’s and early 70’s, the aforementioned short comings develop into full on illnesses and they begin to struggle to function and require varying levels of care. In their mid 70’s to late 70’s they require extensive care.

        In terms of public sector workers their occupational pensions have been divided thus:

        1. From 01/04/15 their defined benefit final salary schemes will be frozen and index linked. These pensions will be payable at 60.

        2. From 01/04/15 a new defined benefit pension based on their career average salary will be forced upon all employees. The career average salary scheme was introduced in August 2007 for employees starting after that date.

        Thus from 01/04/15 all public sector workers will be enrolled in career average salary based pension schemes with a twist.

        The twist is that they will receive their career average salary based pension upon reaching the official state retirement pension age (currently around 66 – 67 depending on when you were born but this will obviously rise in the future)

  2. george the first says:

    Sounds good in principle, but people who do manual jobs tend not to be very computer savvy, for example, and presumably chose manual work because it suited their talents better. I could definitely not do manual work and never have, but am envious of those, even in their early 70’s, who are still able to do so.

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