GAD rate hits rock bottom and will cause misery for the newly retired

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GAD Rate drops to 2% the lowest possible level. Income drawdown investors will be hit hard as their income will drop significantly at their next review.

My Pension Expert
The rate announcement signifies a real milestone in the crisis and how this is affecting retired and retiring people. Quantitative easing, historically low interest rates, the banking crisis and volatile stock markets have created the perfect storm.

Yesterday’s GAD rate announcement has seen the rate drop to its lowest point in history, which will cause the newly retired to struggle with their retirement income. GAD dictates the maximum income level that can be taken from an income drawdown plan, affecting thousands across the UK.

The rate has fallen to 2% this month, in comparison to last month where it sat at 2.25%. The rate has been hovering at 2.5% so far this year, down a whole 2% from last year and down a considerable 5% from 1996.
As a society that is living and working longer, people want to feel secure in later life; however, today’s pensioners are set to suffer a shock to their income levels. Anyone who is due to have an income review, which takes place after 5 years with income drawdown contracts, will see that 5 years of flat stock market performance has seen little growth to their funds and all the while they have been able to take out income at a far higher level. They will see they have lost out substantially due to the lack of investment growth taking place. Crucially, their income will now drop further to the new GAD rate, whereas previously investors were able to take out 120% of the GAD rate. There are limits now in place on the maximum GAD you can access, which is now 100%, meaning the rate is only 2%.

Scott Mullen from My Pension Expert commented that the rate announcement signifies a real milestone in the crisis and how this is affecting retired and retiring people. Quantitative easing, historically low interest rates, banking crisis and volatile stock markets have created the perfect storm.
He said people should consider their options very carefully and take independent financial advice. While there is no short term sight of things improving there are ways in which retired people can boost their income through the widening rage of investment products available for the retirement market.

My Pension Expert is a company of Diploma Qualified Independent Financial Advisors who specialise in the at retirement market.

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