This rise in the rate, the fourth in as many months, will enable retirees using income drawdown to unlock hundreds of extra pounds from their pensions
Doncaster, Yorkshire (PRWEB UK) 19 September 2013
The maximum income that can be taken from income drawdown and fixed term annuity contracts - the GAD rate - will rise to 3.25% next month, the highest since September 2011.
Income drawdown allows people to keep their pension pot invested but withdraw an income from it each year. However, the amount of income that can be taken is set by the Government Actuary's Department (GAD) and is known as the GAD rate. The GAD rate is set against standard annuity rates which are in turn influenced mainly by gilt yields (UK government bonds), with low gilt yields equaling low annuity rates. Currently, strong service and manufacturing data in the UK as well as good US job figures seems to have convinced investors to stay away from the safe haven of UK government bonds and gilts and invest elsewhere. This has contributed towards the continued rise in the GAD rate.
What the new rate means is that a 65 year-old in income drawdown will now be able to take £61 per £1,000 from their pension fund, compared to the previous £59 figure. An individual with a £100,000 fund will be able to take £7,320 rather than £7,080. Scott Mullen from My Pension Expert said, "This rise in the rate, the fourth in as many months, will enable retirees using income drawdown to unlock hundreds of extra pounds from their pensions, which in turn can help relieve some of the financial pressure they may be under."
Monitor GAD rates and their impact on the investments at retirement at My Pension Expert for regular news and updates.
My Pension Expert is a company of Diploma Qualified Financial Advisors specialising in options at retirement.