LV= offers best of a ‘GAD’ situation

Retirement specialist LV= confirmed it will offer new income drawdown clients the maximum income possible, by basing the income that can be drawn down on whichever Government Actuary Department (GAD) table produces the best results for them.

HMRC has provided the industry with new GAD tables that must be applied from 6 June 2011. However, it has announced that these new tables can be used as soon as 6 April 2011 (and must be used for anyone over 75 at this point) so providers can incorporate the new tables into their systems alongside other legislative changes. LV= expects many other providers to only offer income based on the new set of GAD tables from April 2011.

There will be winners and losers in terms of the maximum amount of income available if only the new GAD tables are used during this two month period. Clients over 75, and clients looking at drawdown for the first time, particularly younger customers, could benefit from the new tables.

But other clients already in drawdown, and those whose review falls within this two month period, could face a squeeze in the maximum income they are then able to drawdown for the next three years. For example, a 68 year old with a £200,000 fund could see a £600 reduction in the maximum income available per annum, £1800 over the three year review period, by using the new GAD tables.

John Perks, LV= retirement solutions director comments: "We are not suggesting that everyone should take the maximum income available under their drawdown plan, but we do believe that people should be allowed the flexibility to have the best possible income available to them. We expect providers to make a clear choice between the current or new GAD tables on 6 April 2011, particularly those providers who have admitted they are already struggling with wider systems changes in the short time available.

"LV= is giving clients maximum income flexibility by offering whichever GAD rate best suits their circumstances, until the new rates have to be implemented on 6 June. Any provider not offering this flexibility risks capping a client's income at a lower level than necessary.

"With maximum income being reduced from 120% to 100% of GAD on 6 April, customers could be hit by a double whammy if the calculation of the underlying GAD rate also reduces. We are trying to reduce the impact on clients and make the transition into the new rules as smooth as possible."