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        Updated: April 16, 2024

        GAD Income Drawdown

        Wondering how GAD rates impact your retirement income? Our in-depth guide explains all you need to know.

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        It’s important for some drawdown scheme members to be aware of a certain figure called the GAD rate – or Government Actuary’s Department rate, to give it its full title.

        That’s because GAD rates play an important role in determining how much some people can withdraw from their pension each year.

        In this comprehensive guide, we explain everything you need to know about GAD rates, including what they are, who they impact, and how they may affect your retirement income.

        What is the Government Actuary Department (GAD) and how does it affect pensions?

        The Government Actuary Department, or GAD, determines the maximum amount a person can withdraw from their pension pot each year if they have a capped drawdown pension using something called the GAD rate.

        Capped drawdown schemes were the go-to option for people who wanted to take an income from their pension without purchasing an annuity, before pension freedom rules were introduced in April 2015.

        Since then, all new drawdown plans have been flexi-access pensions, which allow you to withdraw as much as you’d like from your pot, whenever you like.

        Capped income drawdown pensions are no longer available. However, if you have an existing one, you can continue to use it.

        Speak to an expert today

        What’s the GAD rate?

        The GAD rate is part of a formula used to calculate the maximum amount a member of a capped drawdown scheme can withdraw from their pot each year per £1,000 of their total fund.

        GAD rates are unisex and, as they’re tied to 15-year GILT yields, change monthly. Your age is also another factor, so when combined with the GILT rate gives you the GAD rate. As a result, this means GAD rates – and subsequently the amount of pension you receive – will differ for everyone depending on both of these factors.

        What’s the current rate?

        15-year GILT yields at the time of writing (December 2022) are 3.5%.

        How it is used to calculate maximum annual income limits

        To work out the maximum you can withdraw from your capped drawdown pension each year, you must first calculate your GAD rate. This figure is then uprated by 150%.

        For example, based on the current 15-year GILT yields of 3.5%, the GAD rate for a 60 year-old would be £56. Once we uprate this figure by 150%, we can calculate that a 60 year-old would be able to take £84 per £1,000 held in their pension pot.

        So, if he or she had a pot worth £50,000, the annual maximum would be £4,200.

        Roughly speaking, the amount is 150% of the income a healthy person of the same age would get from a lifetime annuity.

        Current legislation requires that maximum annual income limits must be reviewed at least every three years if you are under age 75. Once you reach age 75, maximum income must be reviewed once a year. If GAD rates rise during this time, this could boost your annual income levels. In other words, you may be able to take more out of your pot each year.

        Where to look for help calculating GAD rates

        HMRC publishes current GAD income drawdown tables on its website. These GAD tables are accompanied by detailed instructions.

        If you need more guidance, however, we highly recommend speaking to an independent pensions advisor who’ll be able to help you to calculate the maximum you can withdraw from your pension as well as the maximum you should be withdrawing each year, based on your individual circumstances and objectives.

        Get bespoke advice about GAD rates from a pensions advisor

        If you have a capped drawdown pension, it’s important to stay on top of how much you’re able to withdraw from your pot annually. It’s also crucial that you’re taking an appropriate income each year, based on your goals and personal circumstances as the last thing you want to do is run out of money in retirement.

        An independent pensions advisor is best placed to help you.

        We have advisors in our network who are highly experienced in dealing with capped drawdown pensions and GAD rates.

        Give us a call on 0808 189 0463 or make an enquiry for a free initial chat.

        Ask a quick question

        We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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        Tony Stevens

        Finance Expert

        About the author

        Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

        Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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