What is Capped Drawdown?

Capped Drawdown

When you take benefits (crystallise or designate funds) you have the option of taking a Pension Commencement Lump Sum (PCLS) and the balance of your fund has to be used to provide an income from your fund or annuity purchase. Capped drawdown is a form of ‘income withdrawal’ where your pension is paid direct from the funds in your pension scheme.

You can choose how much pension you can get each year. The minimum amount is “Nil”. The maximum amount is determined at the date of calculation based on:

  • Your Age
  • The 15 year Gilt yield.
  • The applicable Government Actuary’s Department (GAD) Rate – see link to webpage
  • The funds available.

With capped drawdown you can change the amount you receive each year between Nil and the maximum calculated. You are not allowed to “carry forward” any income that has not been taken.

If you are under 75 we will review this amount every three years unless you request a review at a pension year anniversary. If you are 75 or over we will review this amount every year.

We at PML can guide you through the “at retirement” planning process. Contact us for advice.

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