20th March 2013
Could the income drawdown limits rise again? The pension industry has been lobbying for the Government to change the terms used to calculate the income drawdown limits i.e. the amount you can take from your pension pot each year.
The Treasury has already conceded a significant change late last year, allowing drawdown investors to take around a fifth more from their pension pot by increasing the amount those in capped drawdown can draw down to 120 per cent of the Government Actuary’s Department’s limit.
The limit is calculated using the 15 gilt rate as a basis but the pension industry would prefer other rates to be taking into consideration such as gilts of longer durations or perhaps corporate bonds.
The calculations are quite complicated but the upshot for drawdown investors is that they might be able to withdraw significantly more from their pension pots.
The Budget report says: “The Government has commissioned the Government Actuary’s Department to review the pension drawdown table and the underlying assumptions used to provide drawdown rates to make sure they continue to reflect the annuity market.”
The Government is also considering whether to change the rules governing pensions to allow schemes to invest in unused space in commercial properties which could then be converted for residential use. The move would be the first time pension schemes were allowed to invest in residential property though pensions have been able to invest in commercial property arrangements.
The previous Labour Government came close to allowing investment in residential property before changing its mind.