Pensions - Articles - LV= comment on the latest GAD rate

 Ray Chinn, LV= Head of Pensions and Investments comments:

 "For many purchasing a default annuity from their existing pension provider offers poor returns, and alternative solutions such as income drawdown, investment-linked or fixed term annuities should be considered. Indeed in a low interest rate environment such as this where pensioners who rely on their savings for additional income are hit hard financially these alternatives become even more attractive.

 "Unlike other major financial decisions, once someone chooses how to structure their retirement income, they can't typically review their decision further down line so it is important that they purchase a product that ensures their needs are best met both now and in the future. Income drawdown could provide many with the flexibility they require in retirement; however the fall in the GAD rate highlights the importance of seeking advice when planning for retirement. A client who is thinking about using an income drawdown product would need to consider the sustainability of their income, and how changes in the GAD rate might impact this over the longer term.

 "LV= would like to see the calculation for the income drawdown limit revised so that it is not linked to gilt yields. We believe this would help better protect clients' income from volatility in the market."

 Figures show that, from November, the amount a 65 year income drawdown client can take from their fund will fall from £61 to £59 per £1,000. This means that a 65 year old client with a £100k fund will be able to take £7,080 from their fund.