Capped drawdown

What is capped drawdown?

Capped drawdown was a way an individual could take an income from their pension scheme while their pension fund remained invested. The Government Actuary's Department (GAD) tables determined the maximum annual pension the individual could take.

How does capped drawdown work?

For capped drawdown, after payment of any tax-free cash lump sum, the remaining assets provide an income to the member determined by reference to Government Actuary's Department (GAD) tables. These tables set the maximum annual pension allowable and equate (approximately) to the annuity which could be secured by the client’s fund on the basis that there are no pension increases and no dependant's pension. There is no minimum annual pension.

Capped drawdown will continue to be subject to the maximum levels of income and GAD rates along with three-yearly and annual reviews. However, if income exceeds 150% of the GAD rate, clients will automatically convert to flexi-access drawdown.

Where income remains within GAD limits clients can continue to contribute up to the £60,000 Annual allowance (for tax year 2024/25) but if they move to flexi-access drawdown the maximum that can be contributed to their pension each tax year will be reduced to £10,000 and the carry forward option will not be available.

Capped drawdown is closed to any new applicants.

From 6 April 2015 new pension rules provided greater flexibility for clients to take unlimited income from their pension. Clients already in capped drawdown on this date who want to exercise the greater pension freedoms will need to request to move to flexi-access drawdown, where there are no restrictions on the amount of pension income that can be taken.

For treatment of funds on death, please see death benefits.