Hoban rejects calls to increase pension drawdown limits

Financial secretary to the Treasury Mark Hoban has rejected AJ Bell’s call to increase the limits on income drawdown.

In April, the government reduced the annual sum investors could withdraw from their pension funds to 100% of the equivalent annuity rate, down from 120%.

This month, AJ Bell director Andy Bell wrote to Hoban calling for the 120% limit to be reinstated.

However, Hoban, pictured, has written back refusing to consider the proposal, saying the removal of the requirement to annuitise by age 75 is only possible with the lower limit.

"The change in the drawdown withdrawal rate to a single rate of 100% of the Government Actuary's Department (GAD) rate at any age was integral to ensuring this product was suitable for use over a much longer period," Hoban wrote.

He added it is "unfortunate" that other factors such as market volatility are reducing pension drawdown incomes.

However Hoban said market turmoil only reinforces the Treasury's view that limits must be in place to protect investors from losses.

"In reforming pensions we have to balance freedom, fairness and responsibility," Hoban wrote.

Greg Kingston, head of marketing at Suffolk Life, said: "There must always be a balance between income levels and preservation of capital, however the current situation is resulting in poorer pensioners in times of increasing costs and inflation. 

"At this rate the main beneficiaries of their pension will not be them but the next generation."

Tom McPhail, head of pensions research at Hargreaves Lansdown, said: "The limits are there for a good reason. The risk to investors of allowing them to continue withdrawing at the old rate is they would run down their fund too quickly."