News that ageing rockers Status Quo are to reunite struck a drawdown chord with Mark Lisle, compliance manager at Rowanmoor Group...
In this month’s Q magazine I read that the original line-up of perennial 12-bar blues merchants Status Quo, average age 64, is reuniting for the first time in 30 years, for what they hope will be a lucrative reunion tour.
After a seemingly irreparable breach of trust, Messrs. Rossi and Parfitt have benevolently held out the olive branch to former members Coghlan and Lancaster to once again join them on stage for a series of swansong gigs. No pun intended; this struck a chord.
Many pensioners have suffered significant income reductions, in some cases by up to 50%, on reaching their drawdown review.
News that an ageing rock group is set to reunite struck a drawdown chord with Mark Lisle...
With income levels affected by adjustment in mortality assumptions, historically low gilt yields, and less than favourable investment conditions, at least the current government’s reintroduction of the drawdown basis of 120% is a positive move.
However, the key concern is that this does not provide any immediate easement for those who have already suffered a substantial reduction in their drawdown income.
If only legislation had been drafted so that the reversion to 120% could be applied to the current pension year, rather than the next pension year, then the government would have a ready-made vote winner, quicker than you could say “Rockin’ All Over the World”.
Not that easy
Adjusting legislation quickly and easily is, it seems, never as simple as might first be thought. The draft Finance Bill 2013 contains clauses to allow the maximum income to revert to 120% from the start of the next pension year falling after 25 March.
This relies on pension providers being both willing and able to effect those changes in time but, crucially, they will have to rely on good faith in that they will be applying a rule that will not become law until the Finance Bill is enacted, usually sometime in July.
As a result, this could mean some individuals having to wait up to 12 months to benefit from the change, and the 20% uplift only goes some way to offsetting any reductions.
Allied to that, the government dealt with the European Union directive on gender neutrality by basing the drawdown calculation on the more favourable male rate; with the ultimate effect potentially reducing income by anything up to 5%, also impacting on the benefit calculations.
For anyone in drawdown now, whose next pension year coincides with a formal review, there may need to be some very careful expectation management applied.
Like any fans hoping to see the definitive line-up of the Quo – with some cobwebs being blown Down the Dustpipe before the denim-clad behemoth finds its feet after a protracted schism (forced in part by what would appear to be narcotic differences) – there is an expectation that the anticipation may outstrip the experience.
Ultimately, while the reversion to 120% is good news, one can only hope it is a stop gap until a more fundamental review of drawdown is undertaken. As for the Quo, they are quick to point out this tour is more a series of benefit concerts than a long-term proposition, and they will return to their guise of the past 30 years with able sidemen who, if they did not realise it before, now know they were more ‘Quo’rn than the real deal.
Rather than chopping and changing and leaving pensioners, their financial advisers and their providers feeling discomfited and concerned about the permanence of any strategy, perhaps what the government needs to establish is a drawdown status quo; and stick with it.
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