Understanding Income Drawdown

A drawdown pension gives you the option to immediately take a lump sum of cash, tax free, from your pension and then you have two options regarding how to take an income from it:

flexible drawdown pensions
  • Capped Drawdown Pension - annual income is taken from the fund - the maximum limit of this is reviewed every 3 years until the age of 75 and annually thereafter. This figure will be based on your age and the size of the fund and will be derived from tables published by the Government Actuaries Department.  There is no minimum limit.

  • Flexible Drawdown Pension - there is no maximum limit with this option, however you need to prove you have a secured pension income of £20,000 or more per annum already from other pension arrangements in order to qualify for this option.  To be eligible for flexible pension drawdown you need to:

  • Satisfy the minimum income requirement
  • Be an active member of an existing defined benefit or cash balance pension scheme
  • Have made no contributions in the same tax year as you take your flexible drawdown

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