Richard Collinson – RetireEasy

What would you consider to be a reasonable growth rate for you Pension Plan (that’s Yield + the increase in share prices) for a reasonably conservative and well spread portfolio, over the long term.

If you are looking at the predicted average life expectancy in retirement for someone aged 65 retiring today, this might mean the next 30 years!

Suppose you said 6% per annum. Well, the Government currently allows a GAD rate of 5.6% for income drawdown schemes which means over those 35 years your pension plan would gradually grow in value leaving a larger sum when you die than you have right now, even after allowing for the paltry age-related increases in the GAD rate. Do the sums assuming a total return of 8% (not unheard of by any means) and your pension will be worth several times its current value, even at today’s values.

So, you leave this sum to your dependants, if you have any; but if you do that a whopping 55% goes in taxes leaving just 45% to those dependants. But don’t you want to have the use of these funds for your retirement. A recent survey conducted by RetireEasy.co.uk showed that most people in or facing retirement want do just that.

Also the gilt yields are on the floor mainly due the Government’s QE policies so at a time when the Government is itself forcing down annuity rates and GAD rates what does it do – it changes the rules so you can only take 100% of GAD rather than 120%. This is bizarre policy as forcing retirees to take a lower income reduces the tax revenue for the Government

Yet, the Government needed to raise tax revenue from retirees by removing the age-related tax free allowances so has the Government.