Capped Drawdown Background
Capped Drawdown Background
Capped drawdown is an option available to individuals who were in drawdown prior to 6 April 2015. This is a form of drawdown from a pension scheme where a maximum income level (the ‘cap’) is applied. The drawdown pension available to an individual is based on a number of factors. These include the value of the fund, Gilt Yields, and rates determined by the Government Actuary’s Department (GAD).
An individual can draw 150% of the amount specified, which equates very broadly to what could be obtained through a single life level annuity. Please note that by taking the maximum drawdown, you will be depleting the amount of fund available to take future drawdown benefits.
Further Designations
Income Reviews
The maximum amount of annual income is calculated at outset, and then once every 3 years (unless you are over the age of 75 in which case they are calculated annually. This new cap will stay in place until the next recalculation, regardless of any changes in value of the value in between.
An individual can exceed the income cap if they wish, which automatically converts the arrangement to a flexi-access drawdown arrangement. The cap will no longer apply, and an individual can draw the balance of the fund as income (which will be subject to tax). The individual will also become subject to the Money Purchase Annual Allowance (MPAA), which is designed to prevent recycling of pension income into a pension scheme. When the MPAA applies, an individual is restricted to a maximum contribution of £10,000 per annum gross to money purchase arrangements, and is no longer able to use Carry Forward.
⚠️Impersonation of Alltrust Services Ltd ⚠️
We are aware of a scam involving individuals impersonating Alltrust SIPP Ltd. Please note that we have not changed our contact details or phone numbers.
If you have any concerns about the legitimacy of a communication, do not act on it. Instead, contact us directly:
– Email: hello@alltrust.co.uk
– Phone: 02920 772970
Stay informed and protect yourself. Learn more about scam awareness at https://www.fca.org.uk/scamsmart.