How Are the New Pension Drawdown Rules Different From the Old Ones?

I’m a bit confused about the new pension drawdown rules. What’s the difference between flexi-access drawdown and the old income drawdown rules? Is flexi-access drawdown just a new name for flexible drawdown? Also, the old income drawdown rules used to include capped income drawdown but this doesn’t seem to be mentioned anymore. Has capped drawdown been abolished?

Question asked by Ms P Liu

The pension freedoms did indeed involve radical changes to the pension drawdown rules.

As you mention before the April 2015 pension freedoms there were two types of income drawdown available: flexible income drawdown and capped income drawdown.

Different Types of Pension Drawdown

What is Flexible Drawdown?

Flexible income drawdown was most similar to the new flexi-access drawdown contracts available today. It placed no limit on the amount you could withdraw from your pension in a mixture of income and lump sum payments as you required.

The only condition was that you had to have a guaranteed pension income elsewhere of £12,000 a year to use flexible drawdown, which meant it was largely geared towards wealthier pensioners.

What is Capped Drawdown?

Capped drawdown was the alternative to flexible drawdown for those without the required guaranteed pension income.

As the name suggests, capped income drawdown placed a cap on the amount you could withdraw from your pension. This was 150% of the value of a single life annuity that a person of your age could purchase based on rates from the Government Actuary’s Department.

What is Flexi-Access Drawdown?

Flexi-access drawdown is now the only type of drawdown contract available to new customers following the April 2015 pension freedoms.

There’s no minimum income requirement to make use of flexi-access drawdown. It works by allowing you to create your own flexible schedule of lump sum and income payments from your pension as required.

Do I Need to Move Old Drawdown Pensions to Flexi-Access Drawdown?

If you were in flexible drawdown before April 2015, you’ll automatically have been transferred to flexi-access drawdown. You won’t have to do anything.

If, however, you were in capped income drawdown before the pension freedoms then you won’t have moved automatically. You can choose to stay in capped income drawdown or move to flexi-access drawdown, either actively, by notifying your pension provider, or simply by breaching the old cap that was in place and taking more from your pension than you were entitled to under the old rules.

While flexi-access drawdown offers more freedom and flexibility than capped income drawdown, one of the major benefits of staying in capped drawdown is that you retain your full pension annual allowance (the amount you can pay into your pension each year and still get tax relief).

With flexi-access drawdown, your annual allowance is reduced once you start taking an income — this is known as the money purchase annual allowance and currently stands at just £4,000 per year compared to a maximum of £40,000 per year otherwise.

Our Services & Tools

Get In Touch

Do You Need Some Help?

Our purpose is simple: Improve Your Financial Wellbeing.

We use clever technology to bring your financial future to life 🤓

See Your Financial Future
  • Find, organise and simplify your Pensions, ISAs and other investments.
  • Plan your financial future and put a strategy in place to achieve this.
  • Regularly review how you are doing to make sure you stay on track.

Pension Pot Calculator

Pension Drawdown Calculator

Final Salary Calculator

Contact Us
Head Office & Pensions and Investments
Senator House
85 Queen Victoria Street
London
EC4V 4AB
Personal Insurance & Accounts Payable
Telecom House
125-135 Preston Road
Brighton
BN1 6AF
Drewberry London Office MapDrewberry Brighton Office Map
Our Core Principles
  • 1You Come FirstWe are a client focused business who always aim to put you first.
  • 2We are ExpertsTo provide you with the best advice, we need to know our stuff!
  • 3We are HumanWe are real people with feelings who are here to help you.
  • 4We are ProfessionalProviding a 5-star service requires a professional approach to everything we do.
  • 5We are here to EducateWe don't believe in sales, we are here to educate so you can make informed decisions.
Finalist - Moneyfacts AwardsFinalist - Cover Excellence AwardsHighly Commended - Protection Review Awards
Proud member of AMII (Association of Medical Insurers & Intermediaries)Proud member of Money Advice ServiceProud member of UnbiasedProud member of BIBA (British Insurance Brokers' Association)

If you are unhappy with our service, we have a complaints procedure, details of which are available upon request. If you are unhappy with how your complaint has been dealt with, you may be able to refer your complaint to the Financial Ombudsman Service (FOS). The FOS website is www.financial-ombudsman.org.uk.

Drewberry Ltd is registered in England and Wales. Companies House No. 06675912

Drewberry Ltd registered office: Telecom House, Preston Road, Brighton, England, BN1 6AF. Telephone 0208 432 7333

Drewberry Ltd (Financial Conduct Authority No. 505473) is an Appointed Representative of Quilter Wealth Limited and Quilter Mortgage Planning

Limited, which are authorised and regulated by the Financial Conduct Authority.

Cookie Use

Drewberry™ uses cookies to offer you the best experience online. By continuing to use our website you agree to the use of cookies. If you would like to know more about cookies and how to manage them please view our privacycookie policy.