Large income drawdown withdrawals a myth, research shows

Most individuals using income drawdown do not withdraw the maximum possible and more than half draw nothing, Money Management research shows.

According to the latest income drawdown survey, 52 per cent of clients in drawdown contracts are currently drawing no income, while 28 per cent are drawing 101 to 120 per cent of the Gad rate.

The data, which covers 59 providers and 243,439 customers, dispels the idea that the majority of people using drawdown take the most income they can.

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In recent months, much focus has been placed on those withdrawing the maximum as the highest rate available was raised from 100 per cent of Gad to 120 per cent. The change came off the back of low Gad rates, with many drawdown clients having seen a drop in income. However, this sparked fears among some that pension pots would be run down at a much faster rate.

“There is no such thing as a safe rate of income withdrawal,” said Andy Leggett, head of business development at Barnett Waddingham Sipp. There is only a rate that is consistent with the client’s objectives, overall circumstances, investment portfolio and the risks they are willing to take, he added.

“If the client’s main concerns are longevity and loss of purchasing power in later years, they may see 100 per cent as unsustainable. By contrast, a client with significant non-pension assets and an overriding concern that they can’t take their money with them when they are gone may see 120 per cent Gad as insufficient and look to flexible drawdown.”