AJ Bell - industry wants drawdown reform

Research from AJ Bell shows 97% of participants want reforms to drawdown income limits.

The SIPP provider surveyed over 500 advisers and investors, following CEO Andy Bell's letters to Mark Hoban, financial secretary to the Treasury.

Hoban had confirmed the government would not review drawdown calculation rules after reducing the amount people could withdraw in capped drawdown from 120% of the Government Actuary Department (GAD) rate to 100%. This would cause substantial cuts in annual incomes.

Bell said: "The results of the research back my view that the Government are failing to appreciate the strength and depth of feeling on this matter.'

The results show 39% of participants believed the government should remove the link to gilts and base drawdown calculations on a simple age based percentage.

Meanwhile, 31% called for drawdown calculations to be based on a rate based on blended gilt and equity returns as it more accurately reflects the asset classes drawdown investors use.

27% said drawdown rates should still be based on gilt yields but that the 20% uplift should be re-instated.

Only 2.5% agreed with the government's plan to leave the rules as they are.

In Bell's exchanges with Hoban, he called for the government to move away from using gilt yields and actuarial principles to set drawdown limits, a view backed by many in the pensions industry.

Bell understood the government was keen to protect investors, yet he added "protection for the sake of protection is madness, particularly when it creates financial hardship in the toughest of economic conditions.  The changes I am suggesting are simple and will not increase the risk to the investor or threaten the Government's objectives"