Capped drawdown is the drawdown option that existed prior to the 6th April 2015. Like FAD, it allows you to continue to invest your Plan while drawing an income from it, but unlike FAD it is limited to a maximum annual amount set by HMRC. The minimum is nil, meaning that you do not have to draw any pension if you do not wish to. You can take any level of pension up to the maximum amount each year and can change the level you receive at any time. All Capped Drawdown payments are taxed as earned income.
Capped drawdown is not an option for members who crystallise their benefits for the first time after 6th April 2015. Members who had designated funds to capped drawdown prior to 6th April 2015 can continue with this option as long as they have not triggered the Money Purchase Annual Allowance rules. Taking more income than the current annual maximum calculated for your Capped Drawdown fund will result in the fund being automatically converted to a Flexi Access Drawdown fund and would therefore trigger the money purchase annual allowance rules.
You can draw your pension income through regular payments (either monthly, quarterly, half yearly or annually). You can also take one-off payments as and when needed.
The maximum pension that you can take is 150% of the relevant Government Actuary Department (GAD) rate. This rate is determined by your age and returns from Government securities. We will apply this rate to the value of your crystallised fund at the time it is first used to provide pension drawdown and at each review.
We will review your maximum pension every three years until you reach age 75. From that point we will review your pension annually.