Drawdown pensions: new GAD tables mean lower maximum withdrawals
HMRC has published new tables for use in calculating maximum drawdown pensions from 6 April 2011.
From 5 April 2011, the rules relating to income drawdown from money purchase pension arrangements are changing. Under measures contained in the draft Finance Bill 2011, the current unsecured and alternatively secured pension options will be replaced by a single "drawdown pension" regime (see Legal update, Finance Bill 2011: pensions provisions (www.practicallaw.com/3-504-1819)).
In anticipation of the change, HMRC has published new tables prepared by the Government Actuary's Department (GAD), which individuals and advisers can use to calculate the maximum annual drawdown pension under the new regime. Further guidance from HMRC is expected at the end of March.
According to the Financial Times, individuals entering drawdown arrangements after 6 April could face a double shock. Given declining UK gilt yields, the rates in the 2011 GAD tables are lower than those in the 2006 tables previously in use. Additionally, the draft Finance Bill clauses cap annual income at 100% of the amount of a comparable annuity instead of the current 120% limit. That said, an individual who can satisfy the new minimum income requirement of £20,000 will not be subject to the 100% limit.