It should also be remembered that the maximum Gad (Government Actuary’s Department) drawdown calculation is just that: a maximum. While there may be a need or temptation to take the maximum, this should be considered against a backdrop of what is both a sensible and, more importantly, sustainable level of income to draw based on likely investment returns. Of course, the job is made harder by other factors such as changing drawdown rules, a fluctuating gilt rate and even the influence of the EU – for example, the European Court of Justice’s ruling on gender neutrality. The health and life expectancy of the retired member will also be an important factor.
Taxing your knowledge
There are also tax considerations with drawdown. For example, should phased drawdown be applied to utilise the tax-free lump sum in providing income, while also sheltering as much of the fund as possible out of the potential 55 per cent death benefit tax charge environment? Flexible drawdown needs to be considered too.
The at- and in-retirement market now provides many options to better fit individuals’ needs and changing requirements through a much extended period of retirement. The flexibility that many Sipp clients value presents a challenge and opportunity for those involved in the Sipp market to deliver.
Robert Graves is head of pensions technical services at Rowanmoor Group
