Capped Drawdown

Capped Drawdown is a continuation of Unsecured and Alternatively Secured Pensions (USP and ASP). – a way of releasing a pension commencement lump sum without buying an annuity.

The main points of a capped drawdown contract are relatively simple. Just like an annuity you can take the tax-free cash from the pension, but rather than buying a fixed income with the remaining funds, you withdraw money from your pension fund if income is desired.

Currently the amount you can withdraw from your fund each year is equivalent to 1.5 times the same as a level annuity for a single person.

You can start taking benefits from your plan after age 55 with no upper age limit.

The upper income limit is reassessed every three years for those under 75, based on age and fund size, whereas after age 75 the upper income limit is reviewed every year.

In the event of death the remaining fund can be be used by a dependent to continue to draw income, or buy an annuity, or be paid out as a tax free lump sum.

The fund can also be paid to a charity in the event of death and is not then taxed.

Credencis recommend that your drawdown contract is reviewed on an annual basis to check your changing income requirements, tax positions, attitude to investing your money, and advise on the actual performance of your portfolio.