Capped Drawdown | Pension Drawdown Company

What is Capped Drawdown?

Capped Drawdown was a Pension Drawdown option with limits on the income you could take. Since the 6th April 2015, Capped Drawdown is no longer available, and has been replaced by Flexi-Access Drawdown instead.

What If I Am Already Using Capped Drawdown?

You can continue to use Capped Drawdown if you wish, and your provider will continue to calculate and apply the cap. A new annual income limit ('cap') will be set every three years, until you are age 75 - from there it is reviewed annually thereafter.

Depending on when you started Capped Drawdown and the scheme you are using, it is possible in certain circumstances to review the income cap more frequently.

If you don't want to be constrained by the annual income limit, it is now possible to switch your Capped Drawdown fund into Flexi-Access Drawdown, where you will be able to withdraw as much of your pension fund as you wish.

Making Further Contributions to your Pension

While you are in capped drawdown, you can pay up to £40,000 a year into any pension until age 75 and receive tax relief. Your personal contributions cannot be greater than your earnings from all sources in the tax year concerned. After 75, you cannot make any further pension contributions.

If you change to Flexi-Access Drawdown and take any income, the amount that can be contributed to money purchase and receive tax relief (also referred to as 'contribution based' or 'defined contributions arrangements') pension savings will reduce to £4,000 a year.

If you would like more information, or to discuss whether staying in Capped Drawdown is right for you, please contact us.

The value of investments and income from them may go down. You may not get back the original amount invested.

A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change.