Women will soon be able to withdraw the same amount as men when opting for capped drawdown according to new gender neutrality rules set down by HMRC.
Capped drawdown is the process of withdrawing an income directly from your pension fund while in remains invested. Capped drawdown may be possible once you reach the age of 55 provided your pension fund is of a certain size. There is a limit on the amount that you can withdraw.
At present, maximum capped income withdrawal rates are calculated based on two different tables, one for males and one for females. Because men tend to have lower life expectancies, they are often able to withdraw more from their pensions that women.
As of 21st December, the female table will be withdrawn and maximum income amounts will be based on the male table alone. This could be good news for women who receive increases of around 8% to their maximum retirement income withdrawal limit. For those aged 65 or over with drawdown funds of £100,000, limits could rise from £4,900 to £5,300.
Although annuities will also undergo gender neutrality adaptations, it is believed that calculations will move towards female rates rather than male rates, so omen are unlikely to see any notable improvement to their annuity rate. The rise to capped income withdrawal limits for women could boost its popularity as a retirement option.
Adrian Walker, pension expert at investment platform Skandia said:
“The fact that HMRC has taken this step is an interesting move, and one which will significantly benefit females taking the capped income withdrawal route. Maximum income levels have been adversely impacted in recent months due to the record low gilt yield and volatile market conditions, so this will be a welcome relief for many females.”
“Females already taking a capped income can benefit from this rule change at their next review period. Females approaching retirement today, and considering capped income, should ensure they choose a provider with flexible review periods, or hold back some pension money to top-up their drawdown fund after 21 December, so the entire income amount is recalculated to benefit from the rule change.”