Switch from capped to flexible drawdown
Existing client? Find out the risks and benefits of moving to flexible drawdown
Switch to flexible drawdown
If you are in capped drawdown already, there is the option to move to flexible drawdown to take advantage of the pension freedoms. This is an irreversible decision so please consider your options carefully and if you are not sure contact us for advice.
- Investors have the option of removing the cap and taking unlimited income.
- By choosing to remove the cap on income, contributions to SIPPs and other money purchase pensions will be restricted to £4,000 a year (within your normal contribution limits) once you take your first income payment after removing the cap, or once you flexibly access pensions in another way (for instance taking income from flexible drawdown or as taxable lump sums from pensions held elsewhere).
- There is no charge for our clients to move from capped to flexible drawdown. There is no charge for making income withdrawals, unless you withdraw your entire fund.
Stay in capped drawdown
Investors can choose to stay in capped drawdown, keeping within the existing GAD limits and benefit from potentially larger future pension contributions. They do not need to do anything to do this. There is no charge for making income withdrawals however income will continue to be subject to GAD reviews and a £75 plus VAT GAD calculation fee will apply. See our drawdown charges »
Important information: What you do with your pension is an important decision that you may not be able to change. You should check you're making the right decision for your circumstances and that you understand your options and the risks. Drawdown is a higher risk option than an annuity. The government's free and impartial Pension Wise service can help you and we can offer you advice. The information on our website is not personal advice.
Application pack to switch from capped to flexible drawdown
Simply request your conversion pack by entering your details below or by calling us today on 0117 980 9926.
Your pack will contain:
- An illustration showing how your withdrawals could affect your fund value and future income
- Details on how future pension contributions may be restricted
- Important risk questions to consider (you will need to complete these before proceeding with your application – you can do this via post or by calling us on 0117 980 9926).
How much income you take is entirely down to you. One way is to take only the income generated by the underlying investments, leaving the underlying capital intact to (hopefully) grow, although its value will of course fluctuate. Taking income in this way is called drawing the 'natural yield'.
As an example the natural yield for the UK stock market is currently around 3.81%*. This yield is historic and will vary in future; it is not guaranteed. It is provided to help you make your own decisions on what income to take, but you need to also factor in your attitude to risk and the nature of the investments you have chosen. 3.81% of a fund of £250,000 is £9,525.
Taking more than the natural yield from your drawdown pension might mean selling investments and withdrawing from capital, which increases the risk of you running out of money later on in retirement which could seriously impact your lifestyle. Withdrawals are taxed as income. Don’t forget, you don’t have to take any income if you don’t want to: you could simply take the tax-free cash and leave the rest invested. Explore drawdown income strategies »
*Yield of FTSE All Share 3.81% in March 2016, source FT.