Scheme pensions can beat low income rates - Hornbuckle

Scheme pensions could be a good choice for pensioners in drawdown who have been hit by record low income rates, according to Hornbuckle Mitchell.

Retired people with an unsecured pension (USP) or alternatively secured pension (ASP), will have seen their incomes hit at a time when their pension pot is also falling in value, and Hornbuckle claims scheme pensions could offer a solution.

USP and ASP incomes are based on the Government Actuary's Department (GAD) rate calculations. These rates, which have been calculated for the past 12 years, have hit an all time low due to falling gilt yields.

Mary Stewart, director at Hornuckle Mitchell, says: "The current GAD rate of 3.25 per cent is about one-third lower than its long-term average and may yet go even lower."

"Retirees taking income from USP or ASP have seen their ability to take income severely curtailed, at a time when their pots may also have lost value."

Stewart says retirees could take more income by switching to a scheme pension, where available income is not based on GAD rates. She believes this would be particularly useful for people with health conditions who need extra cash to pay for treatment or care.

Retirees who may breach the lifetime limit or face inheritance tax bills could also benefit by withdrawing enough money to fall below the tax thresholds.

Contact: John Bakie, Tel: 020 7484 9805, e-mail: John.Bakie@incisivemedia.com