Capped Drawdown
Capped Drawdown
This option was introduced in April 2011 and replaces the previously titled 'Unsecured Pension' (USP) and 'Alternatively Secured Pension' (ASP). It is often referred to as 'income drawdown' and this flexible method of providing retirement income can have many benefits for those who do not need guaranteed pension income. The pension fund remains invested and the member draws a pension from their own fund within certain prescribed limits. This option typically appeals to those who feel comfortable with continuing investment risk to their retirement income and can have improved death benefits for any survivors.
The maximum level of pension which can be drawn depends on rates published by the Government Actuaries Department (GAD rates) and there is considerable flexibility in the income provision - it is possible to take a relatively high level of income (within certain limits) or no income and vary between the two. The death benefits can be more beneficial than other income options and one of the main attractions of this route is the ability to start taking pension income whilst deferring any decisions about buying an annuity in the hope that annuity rates improve in the future.
It is important to bear in mind that this method of providing retirement carries some investment risk and there are no guarantees that income levels can be maintained throughout.