Falling gilt yields bring further bad news for pensioners under capped drawdown

10 August 2011

Rowanmoor Pensions, the UK’s largest independent Small Self-Administered Scheme (SSAS) provider and a bespoke Self-Invested Personal Pensions (SIPP) operator, says many pensioners face significant drops in their retirement income as falling gilt yields and government reforms reduce the amounts that can be drawn from a fund under capped drawdown.

The fall in 15 year gilt yields to below 3.5% last week comes on top of changes implemented in April 2011 when the government reduced the income from unsecured pensions from 120% of the GAD rate to 100% under capped drawdown.

Since April 2006, the yields used in calculating maximum income have been as high as 5.25% and only once fell below 3.5% to 3.25% in April 2009. For a 70 year old male, a reduction of just 1% in gilt yield reduces income by 10%.

David Downie, Director of Actuarial Services at Rowanmoor Pensions comments:

“If this situation continues to mid-August, the gilt yield used for reviews that fall in September, or those taking benefits for the first time, will be 3.25%, which in turn will bring down the maximum retirement income that the member can take from their pension funds each year.

“Pensioners who have been in income drawdown from their pensions for some time will suffer the most – these changes, coupled with poor investment returns mean that those who started taking income five years ago have already seen incomes reduced by over 50%. The combination of changes in government regulations, poor pension fund returns and falling gilt yields will continue to result in significant reductions in incomes for many pensioners.”

For further information on Rowanmoor Pensions please visit the website at http://www.rowanmoor.co.uk

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For further information, please contact:

Rowanmoor Pensions

David Downie
Director of Actuarial Services
Rowanmoor Pensions
08445 440 585
david.downie@rowanmoor.co.uk

Anna Hopkinson
Marketing Manager
Rowanmoor Pensions
08445 440 667
anna.hopkinson@rowanmoor.co.uk

Redleaf Polhill

Sally Walton /James Bishop / Stacey Puddepha
020 7566 6750
S_walton@polhill.com
J_bishop@polhill.com
S_puddepha@polhill.com

About Rowanmoor Pensions

• Rowanmoor Pensions provides and administers member-directed pension schemes:
  • Small Self-Administered Schemes (SSAS)
  • Self-Invested Personal Pensions (SIPP)
  • Family Pension Trusts (also known as Family SIPPs)
• Rowanmoor Pensions is the UKs largest independent SSAS and Family Pension Trust practitioner and administers around 4,000 schemes.
• Rowanmoor Pensions’ SIPP features:
  • personal, portfolio based, administration service;
  • expert support from technical and sales consultancy teams;
  • extensive flexibility and choice at retirement, including scheme pension;
  • widest investment opportunities available in the SIPP market;
  • integrated links to investment partners’ systems;
  • streamlined process for settling adviser fees.
• Rowanmoor Pensions was awarded best SSAS provider in the 2008, 2009 and 2010 Moneyfacts Investment, Life and Pensions Awards.
• Rowanmoor Pensions was awarded best SSAS provider in the 2006, 2007 and 2008 Pensions Management Technology Administration and Service Awards.