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Drawdown tables are still very much a part of the pension scheme administration world, with many choosing to stay with Capped Drawdown to retain the higher annual allowance available.
Under capped drawdown, the maximum income someone can take in a tax year is calculated by the age of the individual, the value of the fund and the figures on the GAD tables.
These tables use long term gilt yields and have only provided for rates of 2.0% and above. However long term gilt yields dropped below this level in the middle of 2016. Even though the gilt yields have been below 2%, this has meant that the default for the table has been 2.0%.
In January of this year HMRC published new extended tables, the numbers haven not changed for yields above 2.0% but now go down to gilt yields of 0.0% to reflect the fall.
These revised rates, however, will not apply until 1st July 2017, which will give administrators time to update their systems. In the interim period it is necessary to continue to use the old tables.
So, what will this mean for those individuals drawing pensions under the capped system?
As gilt yields fall, so do the conversion rates of capital fund to maximum income. The likely result will be that maximum pension income levels may reduce. This may encourage some to move into flexible access drawdown (FAD), however consideration must be given to the reduced amount of contribution then available.
If you feel that you may be affected by the new drawdown tables, we would suggest that you speak with your usual financial adviser or alternatively, speak to Ted Hulme for more information on 01772 550786 or via email email@example.com