HMRC has announced that the new Income Drawdown limit, announced in George Osborne’s Autumn Statement, will be introduced sooner than expected.
HMRC has said that the increase to the maximum income allowable from an Income Drawdown plan will be introduced from 26th March 2013, much sooner than many experts had thought would be the case.
The coalition government had previously reduced the maximum income pensioners could take from their Income Drawdown plan from 120% of the GAD (Government Actuary’s Department) rate to 100%.
However, a combination of falling gilt yields, resulting from the Bank of England’s policy of Quantitative Easing and the cut from 120% of GAD to 100%, has caused severe financial hardship for many Income Drawdown investors, some of whom have seen their income cut by 40%.
The Chancellor’s announcement in the Autumn Statement that he was planning to reverse his earlier decision and increase the maximum available income back to 120% of the GAD figure was greeted with some surprise, but was almost universally welcomed by pensioners and industry experts alike.
It had been thought that legislation would be required, which would have delayed its implementation, however it now looks as though HMRC will making the change from 26th March of this year.
When will the changes take place?
The higher limit will apply to pensioners whose Income Drawdown year begins on or after 26th March 2013. Investors whose pension year begins before 26th March will find themselves stuck on the lower limit and will have to wait until the start of their next pension year to increase their income level.
The new rules might be confusing to some, our team of Independent Financial Advisers in Nottingham are experienced in developing retirement income strategies for clients the length and breadth of the UK. If you are approaching retirement and would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email firstname.lastname@example.org