Women could see their pension income increase by up to 8 per cent from December after the Revenue confirmed EU gender neutrality rules will apply to the rates used to calculate the maximum amount of income a female can take each year from a capped income drawdown pension.
The main alternative to a traditional annuity, income drawdown allows investors to decide where to invest a pension pot and how much they take from it as income. A capped income drawdown pension has restrictions on how much can be withdrawn each year.
maximum capped income rates are calculated using two different tables, one for males and one for females. As males tend to have a lower life expectancy, the amount of income males can withdraw from their pension has been higher than for females.
From 21 December, the rates used to calculate the maximum amount of income a female can take from her pension each year in drawdown will be based on male life expectancy rates. This could result in a significant increase in the maximum income withdrawal limit available to females, which could see the product's popularity soar. "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," says Adrian Walker, Skandia's pension specialist.
"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."