AJ Bell boss urges Treasury to change drawdown rules
Andy Bell, chief executive of AJ Bell, has urged the Treasury to change its "detrimental" drawdown calculation rules which he claims were hurting thousands of pensioners.
In an open letter to financial secretary to the Treasury Mark Hoban MP, Mr Bell asked for an immediate reinstatement of the maximum income to 120 per cent of the Government Actuary's Department table for people in drawdown, instead of the current 100 per cent.
He also demanded a change in the way maximum drawdown income was calculated. Mr Bell told Mr Hoban he wanted to see a policy review into whether "slavishly following gilt yields and actuarial principles" was the most appropriate way to set drawdown limits.
He outlined three options the Treasury could follow to set drawdown levels. These were to remove the link between investment yields and maximum drawdown income, to replace the gilt-based maximum drawdown calculation with one based on blended gilt and equity returns, or to retain the gilt-based maximum drawdown calculation but reinstate the 20 per cent uplift in income calculations.
Drawdown users have faced significant cuts to their income because of the reduction in the maximum amount they can take from 120 per cent of the old GAD table, to 100 per cent of the new, reduced GAD table.
Mr Bell said the combination of reduced drawdown limits, lower GAD tables, historically low gilt yields and volatile markets have driven down pensioners' income levels, and urged the Treasury to take action.
But George Martineau, employee benefits director for Edinburgh-based Mearns and Company, said he disagreed with Mr Bell.
He said: "You could argue it is good to keep the GAD level at 100 per cent because markets are going down. If someone took out more than 100 per cent, it would take a lot of effort to get that fund back up to where it was. There is also still merit in having that gilt link."