Rising gilt yields mean higher income drawdown limits for pensioners in January.
The rate used to calculate the maximum annual income someone can take from income drawdown will rise from 3% to 3.25%.
This Goverment Actuary’s Department (GAD) rate has risen from 2.25% to 3.25% over the past year, in line with rising gilt yields.
It means that a 65 year old in income drawdown with a £100,000 pension fund would see their maximum income limit rise from £7,080 to £7,320 a year, an increase of £240 a year or 3.39%.
Income drawdown tends to better suit investors who have larger pension funds, other sources of income and a more adventurous attitude towards investment risk.
Taking the maximum amount each year from income drawdown is rarely advisable because it can result in the erosion of your pension fund over time, particularly if combined with negative investment returns.
Do speak to us if you have any questions about your retirement income options or choosing the most suitable option when you reach retirement.
