The latest 15-year gilt yield fell to a new record low of 2.25%, which will lead to lower income for people retiring today, whether it be via a lesser annuity income or a lower maximum income level in drawdown, according to Skandia.

With stock markets around the world remaining volatile it is possible however, to turn it to advantage with regard to the value of your pension fund.

The 15-year gilt yield plays a crucial role in determining the level of income pensioners are able to take, as does the size of a person's pension fund.

 

Age related income factors, provided by the Government Actuaries Department, is also a factor. 

Gilt-yield has been in steady decline since April 2011. This decline will have a real impact on those who are now considering the use of income withdrawal or annuities to provide retirement income. 

It will also affect those already in income withdrawal if their maximum income becomes subject to a statutory review in the coming months.

There is however, one simple way in which someone can potentially achieve a higher income from their pension. 

When going into drawdown, ensure you keep some of the cash fund back, even if it's just a small amount. Then wait for stock markets and/or gilt yields to pick up, which could mean waiting a few months, or in today's volatile market, could mean waiting just a few days, and then put that amount into drawdown.

Each time new monies are moved into drawdown, the revised maximum income is applied to the entire amount in drawdown, provided the pension scheme allows it. 

This could help raise overall income levels substantially for the remainder of the statutory 3-year period before the maximum income has to be recalculated.

Adrian Walker, Skandia's Pension Expert, explains: When a person reaches retirement, all too often they take their maximum tax-free cash lump sum, which means the entire fund goes into drawdown ...They may or may not then take an income with the remaining fund.

People need to be aware of the advantages keeping a partial cash lump sum within their pension when they come to drawing an income.

Walker continued, Holding a small amount back, and drip feeding it, possibly on a regular basis, into drawdown could increase a persons chances of raising their overall income level if stock markets or gilt yields improve ... Importantly, the entire pension can benefit from any improvement in maximum income calculations if the pension arrangement is structured in this way. This can give hope to those who cannot wait for gilt yields to improve before they start to take an income from their pension.

Not all pension contracts offer this flexibility, so people need to check with their provider what options they have, and seek professional advice from their pension adviser too.

Then again, for every £15,000 tranche of cash, you could buy a £75,000 property, remortgage it at 6-months, withdraw your original £15,000 and do it again. Each BTL property returning c.£400pcm gross rent.

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