Income Drawdrown GAD & Splitting the Fund – Pensionfinder
There is the possibility that the maximum amount of money you are allowed to draw as income will exceed the amount that can be withdrawn from a regular single life annuity. Government Actuary Department (GAD) tables are used to decide how much your maximum limit is. These tables calculate data including your age, and 15 year gilt yields to come up with a figure. Once the income limits are set, they cannot be changed until the next review.
In the event that you suffer from a serious illness or else you are a smoker, there is the chance that you can receive a higher maximum income level than that supplied by the GAD data. An individual’s lifestyle and health status are not factors taken into account by the GAD calculations.
As long as you remain within the maximum limit, you can withdraw any amount you wish as well as being able to choose when to withdraw. The plan will be reviewed every 5 years with some companies preferring shorter intervals. This review involves recalculating the maximum income level as there is the possibility that the data will be different.
Once each review has been completed, you will be informed about the new GAD limit which may increase or decrease since the last review. Those who transfer money from their pension fund to the drawdown fund or withdraw money to buy an annuity will automatically be subject to a review. There is also the option of asking for a review to take place each year on the anniversary of the plan. By doing this, you will restart the five year review process. Occasionally, a pension holder may be forced to withdraw money from their funds due to a divorce court order. If this happens, a review will also be automatically implemented.
Splitting Your Fund
This means you can place some of your pension fund in income drawdown and the rest in annuities. This gives you the best of both worlds. With the annuity, you have a certain level of guaranteed income which will ensure you can meet your financial responsibilities. You can then take the rest of the fund and attempt to increase it by putting it into a fund. This can serve as a supplement to the guaranteed income. Should your investments lose money, at least it will not be a devastating blow.