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GAD Drawdown Tables
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Pension drawdown   Income drawdown   GAD drawdown tables

Calculating GAD

The GAD drawdown tables are used to determine the basis amount which represents the value of comparative annuities on a standard single life, level with no guarantee basis. This calculation contains the following elements:

Determine the reference date;
   
Members age rounded down to complete years;
   
FTSE 15-year gilt yield (or 5-year if under 23 years of age) rounded down to the nearest 0.25%;
   
Use the GAD tables to extract the basis amount per £1,000 of pension fund;
   
Use the calculation to determine the basis amount.

This procedure to calculate the basis amount can be used for an unsecured pension fund or alternatively secured pension for males, females and children pension members. Members can withdraw an income from 0% to 150% of the basis amount calculated for income drawdown. This basis to determine the drawdown income was perfered over using pension annuities available in the open market.


Reference dates

The reference date represents the first day of the reference period. This is the date the member first designates their pension to be used for an unsecured pension fund such as income drawodwn.

In some circumstances the scheme administrator may decide to use a nominated date for which there is a 60 day window available after the reference date. For subsequent 5-year reviews the date used will either be the reference date or the nominated date if this is different. The age of the member is calculated in complete years attained before the reference date.


Gilt yields index

To determine the annuity rates, annuity providers make reference to yields available at the time of purchase on government bonds with level coupons (conventional gilts) and corporate bond yields.

To calculate the basis amount GAD has selected the gross redemption on UK 15-year gilts yields from the FTSE UK Gilts Indices. This is published daily in the Financial Times and the date to use is the 15th day of the calendar month before the reference date. If this is not a working day then use the yield for the working day immediately preceding the 15th. In the case of a member aged 23 years and younger, the 5-year index yields must be used instead.

Once this yield is obtained it must be rounded down to the next 0.25%. If the yield is an exact 1/4% there is no need to round down. The formula to calculate the basis amount is as follows:

[£ pension fund / £1,000] x £ basis income per £1,000

Where "£ pension fund" is the members fund value and "£ basis income per £1,000" is the figure taken from the GAD tables for a given age and gilt index yield.


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GAD tables

As set out in Schedule 28 of the Finance Act 2004 the purpose of the GAD tables is to provide the basis amount per £1,000 of pension fund from which the member can calculate the value of comparative annuities on a standard single life, level with no guarantee basis. There are tables for Males, Females and Children which apply equally to unsecured pension funds and alternatively secured pension funds including any protected rights pensions.

1 - Unisex tables (click here)

This unisex table will apply to males and females aged 23 to 85 years (age examples are shown below) for income drawdown.

FTSE 15-year gilt yield: 2.75% (15 August 2014)


Unisex tables
age
now
FTSE 15-year gilt index yield
2.00% 2.25% 2.50% 2.75% 3.00% 3.25%
23 £27 £29 £31 £33 £35 £36
30 £29 £30 £32 £34 £36 £38
40 £32 £34 £35 £37 £39 £41
50 £37 £39 £41 £42 £44 £46
55 £41 £43 £44 £46 £48 £49
60 £46 £48 £49 £51 £53 £54
65 £53 £55 £56 £58 £59 £61
70 £62 £64 £66 £67 £69 £70
75 £77 £78 £80 £82 £83 £85
80 £101 £103 £105 £106 £108 £110
85 £140 £141 £143 £145 £147 £149
Table - Applying to males and females showing the proportion per £1,000 of pension fund for unsecured pensions and alternatively secured pensions to be used in the calculation of the basis amount (comparitive annuity) drawdown quote.


2 - Children tables (click here)

These tables apply to Children only for both male and female aged 0 to 22 years (age examples are shown below) for income drawdown.

FTSE 15-year gilt yield: 2.75% (15 August 2014)


CHILDREN tables
age
now
FTSE 15-year gilt index yield
2.00% 2.25% 2.50% 2.75% 3.00% 3.25%
0 £54 £56 £57 £58 £60 £61
5 £66 £67 £69 £70 £72 £73
10 £87 £89 £90 £91 £93 £94
15 £135 £136 £138 £139 £140 £142
18 £210 £211 £212 £214 £215 £216
20 £343 £344 £346 £347 £348 £349
21 £510 £511 £512 £513 £514 £516
22 £1,009 £1,010 £1,011 £1,013 £1,014 £1,015
Table - Applying to children showing the proportion per £1,000 of pension fund for unsecured pensions and alternatively secured pensions to be used in the calculation of the basis amount (comparitive annuity) drawdown quote.


The GAD tables allow a dependent child to withdraw the full amount of the fund by the time the individual reaches their 23rd birthday. However, as there is no requirement for an annual income there is flexibility for the dependent to withdraw between 0% and 150% of the basis amount allowing for a fund to remain at the age of 23. This may be beneficial if the individual is a dependent due to a physical or mental impairment and an income is required to continue for a longer period of time.


Worked example

A male individual is aged 60 on 4th April 2014 with a pension fund of £100,000 to provide an unsecured pension through income drawdown. This amount is net of the £33,333 taken as a tax free lump sum from an original fund of £133,333.

The reference date is designated as 4th April 2014.
   
His age in complete years at the reference date is 60.
   
The yields on FTSE 15-year gilts to consider is the preceding month on the 15th March 2014. However this is a Saturday so the working day immediately preceding this date is Friday 14th March. This yield is published in the Financial Times on Saturday 15th March. For this example the yield on this day is 3.11%.
   
Round the yield rate of 3.11% down to the nearest 0.25% which is 3.00%.
   
Use the GAD tables for a Male age 60 years and an FTSE 15-year gilt yield of 3.00% which is £53.
   
The pension fund (after tax free cash has been taken) at the reference date is £100,000.

The basis income is calculated as follows:

  [£100,000 / £1,000] x £53
   
  = 100 x £53
   
  = £5,300

This basis income of £5,300 per annum is the comparable annuity on a standard single life, level with no guarantee basis. The maximum income that can be drawn is 150% of this figure or £7,950 per annum. Before making a decision at retirement, learn more about pension annuities, compare annuity rates and secure a personalised annuity quote offering guaranteed rates.


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About Sharing Pensions

Sharingpensions.co.uk was created by it's founder Colin Thorburn in 2001 to provide a free pensions and annuity resource to hundreds of thousands of people at retirement making their decision making easier and to select the best options.

Colin Thorburn has nineteen years experience in pensions and annuities, is an individual authorised by the Financial Conduct Authority and business is submitted through Blackstone Moregate Ltd which is authorised and regulated by the FCA (no. 459051).

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