The Chancellor has raised the maximum drawdown income that can be withdrawn from 100% to 120% of GAD limits.
As an example, we have recently undertaken a review of one of our client’s income withdrawals via a drawdown plan. As a result of the review we have conducted with the client, we have been able to increase the client’s income from £10,400 per annum to £12,480 per annum, by taking advantage of the 20% uplift now available.
Women could see greater increases in income than 20% as a result of the new gender-neutral rules introduced in December 2012.
It is important to note that the 120% GAD limit will only be applied for reviews from the 26 March 2013 onwards and Drawdown plan holders will only start to see the benefit of these changes from the start of their new income year following the implementation of the rule change.
Individuals with an existing income drawdown pension had also been caught in a transfer trap which reduced maximum income for up to four years after transfer. Previously, if an individual transferred a drawdown pension they had to have their income limits reviewed, which thanks to falling gilt yields meant a cut in maximum income that could be withdrawn. HM Revenue & Customs have now abolished the trap – when an individual transfers their drawdown plan they can now keep their current income limits until the next scheduled review.
If you would like to discuss how these changes may benefit you, or you would like to discuss if a Drawdown plan is suitable for your circumstances, then please do not hesitate to contact us.