New income drawdown rates could 'shock' pensioners

HMRC is creating new figures to calculate drawdown limits which could reduce pensioner incomes, experts warn.

The new capped drawdown amounts for individuals will be 100% of their equivalent annuity, rather than 120% as before.

Additionally, the GAD tables used to calculate those equivalent annuity rates may be recalculated, further reducing pensioners' incomes, experts say.

New GAD tables for the over-75s were already being calculated due to the removal of the age-75 rule, which comes into effect in April.

However, Gareth James, technical marketing manager at AJ Bell, says a new table for the under-75s may also be in the pipeline and could be out as soon as next week.

James says HMRC told him it would be foolish to ask GAD to come up with figures for the over-75s as a stand alone exercise, and not review the other figures at the same time.

"We are working up some figures regarding how this will affect clients," says James.

Steve Hart, business development director at Curtis Banks, says it is unlikely a new GAD table would be favourable for pensioners.

"I would put money on the new GAD table making things worse," Hart says.

Hart claims because annuity rates have worsened since the last GAD table was created, the new table "could actually be worse than the existing one".

This, coupled with the new limit of 100% of the equivalent annuity, means pensioners ‘could be in for a shock,' he says.

Hart also says changes may present a problem for providers.

"I would like to think we would have had more time to prepare; it is not as if there is not a lot going on already," he says.

An HMRC spokesperson says: "Updated GAD tables are being prepared as a consequence of the removal of the effective requirement to annuitise by age 75. These will be published shortly on the HMRC website."

However, they say there are no updates planned for the next month and did not confirm which age group's tables were under review.