Income drawdown limits have been raised following an increase in the notional yield on 15-year gilts...
Income drawdown limits have been raised following an increase in the notional yield on 15-year gilts from the 15-year low of 4.11% reached on 13 June.
The 15-year notional gilt yield, the benchmark gilt yield for annuities and income drawdown, had reached 4.62% on 21 July, up more than half a percentage point from its June low.
The Government Actuary's Department has raised the limit with effect from 1 August to take account of the rise in the benchmark yield, which has come despite a 25 basis point cut in the Bank of England's official cash rate target in July.
A male aged 60 investing £250,000 will now have maximum income drawdown of £18,500 per year, up from £18,000.
David Marlow, head of marketing at the Drawdown Bureau, said gilt yields are not rising because of economic factors such as short-term interest rates but in response to an excess of supply over demand.
'The cut in interest rates could normally have been expected to be followed by a fall in gilt yields,' he noted. 'However, the reverse is actually taking place.
'This corresponds with recent forecasts that the Government is likely to take on even more debt and that there will be a surge in the supply of gilts. If the Government does issue more gilts, in the short term we may find that supply outstrips demand.
'This should lead to further gilt yield rises, which, in turn, will lead to further increases in income drawdown limits.'
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till