Glossary · UK
What is Capped Drawdown?
A closed form of pension income drawdown that limits annual withdrawals to a capped maximum, only available to those already in it before April 2015.
Full Definition
Capped drawdown is an older form of pension income drawdown that lets you take an income directly from your invested pension pot while limiting the maximum you can withdraw each year. The cap is based on Government Actuary's Department (GAD) rates linked to your age and gilt yields, and is reviewed periodically. Capped drawdown was closed to new entrants from 6 April 2015, when flexi-access drawdown was introduced; you can only remain in capped drawdown if you were already in it before that date. Its key advantage is that, provided withdrawals stay within the cap, it does not trigger the Money Purchase Annual Allowance, so you can keep contributing up to the full pension Annual Allowance of GBP 60,000 for 2026/27. Exceeding the cap converts the arrangement to flexi-access drawdown and triggers the MPAA of GBP 10,000. It matters chiefly to people managing legacy pension arrangements who wish to preserve their contribution capacity.