Buried in the depths of the autumn statement was a small note stating that pension drawdown limits were changing from 100% to 120%. This effectively means a 20% increase in income for those who have suffered from a change in the rates and gilts and this is good news for many.

To explain:

For a male aged 65 the 2006 tables would have given him an income of £57 per £1000 of pension fund and then this would be increased by 120%. So on £250,000 the income would be assuming a gilt rate of 2.25%:

(£250,000 / £1000 x 57) x 120% = £17,100

The new rules changed the rate to £55 and set the increase to 100%. So using same assumptions the income would be:

(£250,000 / £1000 x 55) x 100% = £13,750

A drop of over 19%. In reality the drop was higher for many because gilt rates had fallen from over 4% to 2.25%.

The changes announced in the budget mean that we can now use 120% in the calculation which brings the income to £16,500 which is great news for many.

But the real winners are females and the EU gender rules.

The EU gender rules mean that for a short period females will use male rates. This means that where they were using £51 per £1,000 they go up to £55 per £1,000 meaning their current income goes from £12,750 to £16,500 (an increase of 30%). Effectively using the 2006 tables this would be equivalent to a 3% yield.

In summary some will argue this is not enough and perhaps the tables need to be reviewed but this is a big opportunity especially for females to increase their income to a more acceptable level. The other important aspect is that this was driven by a campaign where journalists, individuals and industry specialists came together to make it happen.

NOTE: This is written in a personal capacity and reflects the view of the author. It does not necessarily reflect the view of LWM Consultants. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.