Call for the government to reform Income Drawdown rules


One of the pension industries leading SIPP (Self Invested Personal Pension) providers has urged the government to rethink the recently introduced rules governing the maximum income which can be taken from an Income Drawdown plan.

AJ Bell has called for the government to reverse changes to the Income Drawdown rules which has seen the levels of income available to pension savers fall.

Income levels

The changes introduced by the government in April have reduced the maximum level of income which can be taken by someone in Income Drawdown from 120% of the GAD (Government Actuarial Department) limit to 100%.

The GAD rate is set with reference to an individual’s age, gender and also gilt rates, which have fallen in recent months, causing the GAD rate to drop.

The change came at a time when gilt rates fell causing the GAD rate to fall as well and has reduced the income of many Income Drawdown investors who have had a mandatory review since the introduction of the new rules.


Andy BellIn a letter to Treasury Minister Mark Hoban, AJ Bell chief executive, Andy Bell (right) said: “The recent changes to income limits have tipped the balance too far in favour of downside protection”.

He continued: “Whilst drawdown investors accept that the downside protection is needed to prevent their income limits from dropping, I do not believe many will accept the slightly perverse situation that the main reason for a drop in income is the government’s decision to change the rules to provide added protection.”


In his letter Bell called for an immediate reversal back to the old rules followed by a review into whether Income Drawdown limits should be so heavily linked to gilt rates.

Bell said: “There is a question whether it is appropriate for income limits to be based entirely on returns from an investment type that will only form part of a typical drawdown investment portfolio.”

He continued: “This adds to the argument for removing the link to an investment type which is associated with annuitisation on income limits for individuals who may never annuitise.”


In his letter Bell set out three options to solve the problem:

  1. Remove the link between current gilt yields and the maximum income available from an Income Drawdown plan
  2. Replace the gilt based calculation with one linked to a blend of gilt and equity returns
  3. Retain the current method of calculation but reinstate the 20% uplift in income calculation