RPSM10104880 - Technical Pages: Death benefits: Pensions: Dependants' drawdown pension: Dependants’ capped drawdown
The following guidance has been written from the dependant’s perspective
Dependants’ capped drawdown pensions
What is dependants’ capped drawdown?
What is the difference between capped drawdown and flexible drawdown?
Can I switch from capped drawdown to flexible drawdown?
Can I switch from flexible drawdown to capped drawdown?
What is dependants’ capped drawdown?
| [Para 24 Sch 28] |
Capped drawdown is a form of ‘dependants’ income withdrawal’ where your pension is paid direct from your pension scheme. Within certain limits you can choose how much pension you can get each year. You can change the amount you receive each year.
When you start your dependants’ capped drawdown pension your scheme administrator will work out how much you can take each year. If you are under 75 your scheme administrator will review this amount normally every three years. If you are 75 or over your scheme administrator will review this amount every year.
There is another type of ‘income withdrawal’ drawdown pension called flexible drawdown.
What is the difference between capped drawdown and flexible drawdown?
| [S167 Pension Death Benefit Rule 4] |
With capped drawdown there is a limit on the amount of pension you can take from the scheme each year. This limit is regularly reviewed.
With flexible drawdown there is no limit on the amount of drawdown pension you can take each year. You can take as much or as little as you like. There is also no need for your pension fund to be reviewed to work out your maximum possible pension. However not everyone can take flexible drawdown. In particular you must be getting a minimum amount of secure pension income (£20,000) every year to qualify for flexible drawdown.
Find out more about flexible drawdown on RPSM10104990.
Can I switch from capped drawdown to flexible drawdown?
| [s167(2A)] |
Yes, if you meet the conditions for flexible drawdown you can change from capped to flexible drawdown at any time if your scheme allows.
Can I switch from flexible drawdown to capped drawdown?
| [s167(2A)] |
No, the test on whether or not you qualify for flexible drawdown is only at the start of flexible drawdown. Under the tax rules you can’t lose the ability to take drawdown pension using flexible drawdown.
| Glossary (RPSM20000000) |
