Fiona Murphy looks at how income drawdown is changing and likely to develop in the future
In the wake of the restoration of the GAD limit to 120%, it seems as if the gap between annuities and drawdown is widening.
This is echoed in our annuity inquiry on pages 18-19 where a fifth of advisers polled said they felt more comfortable advising on drawdown. Only 10% said they favoured annuities.
Prudential pensions business development manager Colin Simmons has also seen this shift among advisers.
“We’re seeing a bigger appetite from advisers asking about income drawdown,” he says. “I think it’s driven from the 120% GAD rate which is going to boost the amount of income a client can take as income, added to the fact that gilt yields are now slightly higher as well. That combination means that a starting income in drawdown is slightly higher than you would get from an annuity. For the past couple of years, it’s been very similar.”
He also adds that equity markets and gilt yields have picked up, again encouraging confidence among advisers and their clients.
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