The GAD rates used to calculate the maximum income drawdown limits for women will be increased from 21st December 2012, as they are based on male instead of female life expectancy rates.
As things stand, the income limits for capped income drawdown are calculated using separate tables for men and women.
Men tend to live shorter lives than women, so they currently benefit from slightly higher income limits to take this into account.
The withdrawal of the tables for women on 21st December means that men and women will all use the same rates.
Some of the examples we have seen suggest that this change could result in income limits which are 6-8% higher for women, from December onwards.
This change comes about as a result of the new European rules on gender neutrality for insurance products. As a result, men and women will share the same annuity rates, which will typically mean lower annuity rates for women.
With low gilt yields and the maximum income reduction from 120% to 100% of GAD, this announcement will be welcome news for women using capped income drawdown.
To benefit from the new higher income limits, female investors will need to ask their pension provider to review the maximum income limits, or wait until the next formal review date if the provider does not offer this flexibility.
Of course taking the maximum income from this type of pension plan can quickly erode the value of your pension fund, after charges and in the current low return environment.
When it comes to income drawdown, it is really important to seek professional independent financial advice and keep the arrangement under regular review.
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