Rule change was a bonus for drawdown investors

Drawdown investors were among the few winners in the Autumn Statement earlier this month when the government performed a u-turn on a rule restricting the amount of income they could take.

The maximum annual income from drawdown – where the fund is left invested at retirement and income taken directly from it in segments – was cut in the 2011 Budget from 120 per cent of the value of the equivalent annuity to 100 per cent. The limit was changed to prevent retirees from eroding their pension pot too quickly

But it combined with falling gilt yields – which pushed annuity rates down – to slash the maximum income that some retirees could receive by more than half.

The chancellor announced in his Autumn Statement that the maximum amount of income that can be taken by investors in capped drawdown would return to the previous limit of 120 per cent. The change was greeted with relief by thousands of those affected – yet some still face a long wait before they can benefit.

Not only are the rules likely to appear in the Finance Bill, which does not become law until July, but retirees in drawdown will also have to wait for their next review before their income level will change.

For those who are under 75, it is typically three years, becoming annual above that age.