Budget Dec 2012 Pension Drawdown Limit Increase

Budget Dec 2012 - Pension Drawdown Limit Increase

Capped Drawdown is where you leave your pension invested at retirement, probably withdraw you tax free cash lump sum and draw and income down from the pension fund rather than buy an annuity when annuity rates are low.

In 2011, the maximum income you could draw from your pension fund was reduced from drawing down an equivalent of 120% of the maximum Government Actuaries Department (GAD) Annuity Rate for your age to 100%.

Annuity rates have fallen dramatically over the last few years. This has resulting in many people who were drawing down 120%, 1. Faced a paycut because annuity rates have fallen anyway and 2. A further hit because they were only able to draw 100% despite getting growth on their pension.

As a result, many people have suffered with their drawdown income being restricted by up to 50% of what it was.

The Chancellor confirmed yesterday after pressure from the finance industry that the income drawdown limit will be increased again to 120% of the GAD rate from April 2013 bringing welcome relief to many who can afford to draw more and want to draw more.