Income Drawdown - July 2012

Published by Money Management | Jul 03, 2012

Income drawdown has been hit by a barrage of changes in the past few years, compounded by volatile market conditions and falling returns in the market, meaning the option has become less attractive for many.

The reduction from 120% to 100% of maximum annuity income, changes to GAD tables and increased frequency of reviews have all altered the market. In particular the changes are hitting those already in drawdown who are coming up for their five-year reviews and are facing massive drops in income.

Exacerbating this issue is the fact that the markets are still having a very bumpy ride. Returns are far lower than those seen five years ago and, with the turmoil in Europe showing no signs of abating, it seems unlikely that this will change any time soon.

However, the introduction of flexible drawdown has opened up options for some and many argue that there is still a place for capped drawdown in retirement planning, albeit to a more reduced market than before.

But could the option be improved? Claire Trott looks at whether there is room for change, despite the alterations from the April 2011 Budget have yet to bed in.

Meanwhile, Jon Cudby looks at the market and where it could be headed, the challenges ahead and how popular the solution is likely to be in coming years.