PTM062520 - Member benefits: pensions: drawdown pension rules immediately before 6 April 2015: capped drawdown pensions (position at 5 April 2015)
As of 6 April 2024 there is no longer lifetime allowance. If you are looking for information about protections, enhancement factors and the lifetime allowance charge please see these pages on The National Archives.
If you are looking for information about the principles of lifetime allowance and benefit crystallisation events please see these pages of The National Archives.
Glossary |
What is capped drawdown (position at 5 April 2015)
The difference between capped drawdown and flexible drawdown (position at 5 April 2015)
Switching from capped drawdown to flexible drawdown (position at 5 April 2015)
Note: Capped drawdown that began on or before 5 April 2015 may continue, providing there have been no events since that date resulting in its conversion to flexi-access drawdown. But no new capped drawdown funds or flexible drawdown funds may be set up from 6 April 2015 onwards. See page PTM062700 for guidance on flexi-access drawdown funds.
What is capped drawdown (position at 5 April 2015)
Paragraph 7 Schedule 28 Finance Act 2004
Capped drawdown is a form of ‘income withdrawal’ where the member’s pension is paid direct from the funds in their pension scheme. Within certain limits, the member can choose how much pension they can get each year. The member can vary the amount they receive each year.
When the member starts a capped drawdown pension, their scheme administrator will work out how much they can take each year. If the member is under 75, the scheme administrator must review this amount regularly, normally every three years. If the member is aged 75 or over, their scheme administrator must review this amount every year.
There is another type of ‘income withdrawal’ drawdown pension called flexible drawdown.
The difference between capped drawdown and flexible drawdown (position at 5 April 2015)
Paragraphs 8 and 14A Schedule 28 Finance Act 2004
With capped drawdown, there is a limit on the amount of pension the member can take from their scheme each year. This limit is regularly reviewed by the pension scheme.
With flexible drawdown, there is no limit on the amount of drawdown pension that can be taken each year. The member can take as much or as little as they like. There is also no need for the drawdown pension fund to be reviewed to work out the maximum possible pension.
However, not everyone can take flexible drawdown. In particular a person must be getting a minimum amount of secure pension income every year to qualify for flexible drawdown. For flexible drawdown declarations made between 6 April 2011 and 26 March 2014 this amount was £20,000. For flexible drawdown declarations made on or after 27 March 2014, this amount is £12,000.
Guidance on flexible drawdown starts at PTM062580.
Switching from capped drawdown to flexible drawdown (position at 5 April 2015)
If the member meets the conditions for flexible drawdown they can change from capped to flexible drawdown at any time, if their scheme rules allows it.