Drawdown boost as August GAD rate up to 2.75%

SallyG

"Drawdown boost as August GAD rate up to 2.75% ...... "
next month's higher yield could "be the catalyst" to trigger income reviews to lock-in a higher limit."

Read more: http://www.ifaonline.co.uk/ifaonline/news/2282622/drawdown-boost-as-august-gad-rate-up-to-275#ixzz2ZII9hG00

I can't access the HMRC GAD rate tables and can't find any reference in docs to the GAD rate used to calculate/cap my max drawdown -
I went into drawdown in March 2011 - so for me until 2016 the April 2006 GAD rate dictates my max drawdown.
Now the 120% cap has been re-instated my original reason for avoiding an early review has been removed.
Can anyone please tell me what GAD rate applied to drawdown begun in March 2011 ie whether it's worth triggering a review to get the new rate for 3 years instead of 2 more years at the old rate?

SallyG

Found this
http://www.hmrc.gov.uk/pensionschemes/gad-tables-instructions.pdf
Seems to say the 2006 rate applied is 4.12% ...... so no rush to change.

GhIFA

Sally, where are you getting 4.12% from? The relevant Gilt Yields are rounded down to the nearest 1/4%. If it is the reference to 4.12% on page 6 of the document, this is just for example. The actual rate that applied will depend on what the gilt yield was in March 2011 and how old you were at the time.

If you don't mind posting your age on here, I can check what the current rate would be for you and you can then compare that against that which you are currently receiving.

jamesd

Here's the history of gilt yields for GAD purposes for the periods:

2011-01: 4% -02: 4.25% -03: 4% -04: 4% -05: 3.75%
2013-06: 2.25% -07: 2.5% -08: 2.75%

To give some idea, here's what the August values will be:

Age 60: 6.12%
Age 65: 6.96%
Age 70: 8.04%
Age 75: 9.84%
Age 80: 12.72%

Here's what unisex values would have been at the March 2011 gilt yield of 4%:

Age 60: 7.08%
Age 65: 7.92%
Age 70: 9.00%
Age 75: 10.80%
Age 80: 13.80%

But back then you would have received the lower female value (lower payout due to higher life expectancy).

4.12% gilt yield was just an example of an unrounded yield from 2006 because that's when the document was prepared. Not the rate to use for any real calculations.

I suggest that you accept GhIFA's offer but I think that the change to unisex rates won't be enough to offset the lower gilt yield used at the moment. Or just download that spreadsheet I linked to and see what it says. Note that it will be inaccurate for your original cap because it uses today's unisex GAD tables. But good to know.

SallyG

Thanks - I have tried to grasp this concept .... reread http://www.hmrc.gov.uk/pensionscheme...structions.pdf
over and over - a bit like Tony Hancock reading Bertrand Russell - it's in English I must be able to understand it .......
GhIFA - much gratitude - I was 64 when I went into drawdown in 2011 so 66 now.

GhIFA

Sally, based on the current rates your maximum income rate would be 6.96%.

As Jamesd suggests, it's unlikely to be better than the rate you got in 2011, but always worth checking.

SallyG

I'm very grateful - thanks.

jamesd

If the value of your pension pot hasn't changed what I suggest you do is check the gilt yield in January each year. If it is not higher than 3.5% you are not likely to be able to benefit from asking for a new calculation at the next March anniversary date.

However, has your pension pot increased or decreased in value by much? If it's gone down, that would help to produce a lower cap. If it's gone up, that would help to produce a higher one. The percentage part of the calculation might not be an improvement but the cap is based on that percentage of the value of the pension pot, expressed in Pounds, not just the percentage.

So if you say more about how the value has changed that might give reason to think that a new calculation might be useful.

Though really this isn't the best time to be discussing it because GAD calculations get done on the anniversary date in most cases.