Advisers should be looking again at income drawdown after ‘going cold’ on the product in recent years, according to LV=.
Ray Chinn, head of pensions and investment at the firm, said the increase in the Gad rate is good news for both financial advisers and their clients and urged advisers to take another look at income drawdown.
“It’s an area where advisers have gone a little bit cold over the last 24 months as the rates dropped and there was the 100 per cent government cap which has since been reversed,” he said.
Mr Chinn’s comments follow the Gad rate being set at 3.25 per cent for October 2013, up from 3 per cent in September.
In practical terms, this would mean a 65-year-old client on income drawdown with a fund of £100,000 could take £7,320 instead of £7,080.
September is the fourth consecutive month where the rate has risen, which could be an indication that income drawdown is an increasingly attractive option for clients. Falling gilt yields has meant low GAD rates over the past two years.
“It’s a product that advisers should be seriously looking at with their clients, and an area where advisers can really justify their fees in terms of increased income,” said Mr Chinn.
Income drawdown will be under review this autumn when the government looks at its decision to standardise across gender. Currently, the unisex drawdown tables are set at what was previously male rates, meaning women have been able to take a higher level of income than before the gender directive.
