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As part of the changes surrounding the removal of compulsory annuitisation at age 75, HMRC have published a new set of GAD tables to be used when calculating the maximum allowable income a scheme member may draw from their pension.
The new GAD tables replace those that were introduced in April 2006. The changes are in many cases minor, and at younger ages the new GAD rates are slightly higher than the old ones. The more significant changes are for scheme members approaching the age of 75, where the new GAD rates are lower than the old ones: at age 75 the new GAD rates are on average 6.7 per cent lower for men and 2.1 per cent lower for women.
The new set of GAD tables also includes GAD rates that extend to age 85, rather than ending at age 75. GAD rates for those aged 76 or older will sometimes be higher – in some cases significantly higher – than they were before.
The old GAD tables will continue to be used for all income calculations and reviews before April 6, 2011, and the new ones will replace them from June, 6 2011. Between April, 6 and June, 6 2011 either the old or the new GAD tables can be used. Depending on the age of the scheme member and the GAD yield at the time, using one table rather than another could produce a higher level of income.
Given the relatively minor changes to the GAD tables, it should be noted that the significant amendments to income limits under the new capped drawdown arrangement, due to come into effect from April 6, 2011 will probably have much more of an impact on the maximum level of pension income available.
From April 6, 2011 the maximum level of income under capped drawdown is 100 per cent of the applicable GAD rate, reduced from 120 per cent under the current Unsecured Pension limits (and increased from 90 per cent under an Alternatively Secured Pension). Whether the old or new GAD tables are used in the period April 6, to June 6, 2011 the new income limits will still apply.
The new set of GAD tables are available at http://www.hmrc.gov.uk/pensionschemes/drawdown-tables-2011.xls
For further information, contact Kerry Houghton on 01772 555073.