In December’s Autumn Statement the Government announced that the 20% uplift to maximum drawdown calculations, which had been removed from April 2011, would be reinstated. This increase in the maximum can be applied to the pensions of all those subject to the lower post-2011 limits from the start of any pension year beginning on or after 26 March 2013. This increase applies regardless of whether the individual is due for a full three-yearly review of maximum benefits.
AJ Bell has heard suggestions that some providers may not be making this increase available to drawdown investors as soon as the legislation allows. This could be because of limitations in IT systems, restrictions caused by trust documentation, or because providers are interpreting the legislation as only making the rules available where a full GAD review of maximum benefits takes place.
AJ Bell Chief Executive Andy Bell said “I’ve said before that my preference would be for the increase in maximum drawdown to be made available to clients immediately rather making some of those in drawdown wait for more than a year. The suggestion that some clients may be made to wait even longer than this because of systems issues, or because providers are going to force clients to wait until a full review of their benefits takes place will be a worry for many.
Bell continued “To give credit to HMRC, it has been absolutely clear on the implementation of these rules. Clients do not have to go through a full GAD review to benefit from this increase. The existing maximum pension which is subject to the lower post-2011 limits is simply increased by a factor of 1.2 from the start of the new pension year. A full GAD review is not required until the end of the existing three year review period.”