If you have a defined contribution pension, the day will come when you’re ready to switch to the drawdown phase – it’s time to reap the benefits of all of your years of saving. We explain pension drawdown rules including what pension drawdown is, how pension drawdown works and whether pension drawdown is right for you. This brief guide will cover the key things you need to know when you’re ready to move into pension drawdown. But there are things you can do to ensure your money lasts as long as possible while getting the income you need to live on in retirement. Always seek advice beforehand so you can be confident it’s the right decision.When you’ve built up a decent pension pot over many years, you might find it a bit nail-biting to move from saver to spender as you start taking money out. It is important to note that you won’t be able to return to a capped arrangement at a later date. You can change from capped to flexible drawdown by requesting to transfer your pension fund or by breaching the 150% GAD limit. Ultimately, the choice is yours, and you may be able to switch. Remember, flexi-access also reduces your annual allowance to £4,000, though this may not be a concern if you’re no longer contributing to your pension. This can offer far more flexibility and so fits in well with the aim of the pension freedoms, but the downside is that there’s a greater risk of you spending your pot too soon, as without an annual limit you may be tempted to withdraw more than you perhaps should. The main difference between capped and flexi-access drawdown is that, with the latter, there’s no limit on the amount you can withdraw each year. So, let’s take a look at your options.īoth kinds of pension offer a way to take an income from your pot while leaving the remainder of your fund invested. This means those who are already in capped drawdown may be wondering if they should switch to flexi-access instead. When the pension freedoms were introduced in April 2015, capped drawdown was scrapped in favour of offering retirees more flexibility, with flexi-access drawdown the go-to alternative. They’ll start with a free pensions review to see where you currently stand and from there can help you work out how much you should be withdrawing each year – while abiding by the cap – to ensure your pot lasts as long as possible.įind out more about how an advisor can help you make the most of accessing capped drawdown – make an enquiry or call 08 to get started. The pension advisors we work with are well-versed in the area of capped drawdown, and they’ll know exactly what you should do to take advantage. Though it can be difficult to know how best to make the most of this kind of plan, which is where a specialist advisor can come in. You may also be able to move any additional pensions you have into your capped drawdown scheme, if your provider agrees. However, if you’re already in this kind of pension, you’re free to continue using it. Up until that time, anyone that had reached minimum pension age could take out this kind of pension, but this option has since been closed to new applicants.

The ability to take capped drawdown ended on 6 April 2015 when greater pension freedoms came into being.

Phased drawdown definition