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Capped drawdown

Capped drawdown is a way to take an income from your pension savings.

The amount you can take out each year is ‘capped’ at a maximum.

Important information

Please remember the value of your investments and any income from them can go down as well as up and you may get back less than the amount you originally invested.

Related documents

Visit our dedicated SIPP literature page.


How do you work out my maximum income cap?

This is done using HMRC rules.

Your maximum income cap must normally be worked out every 3 years until you are 75. After that it is done every year.

Unless you were already using capped drawdown before 6 April 2015 it’s not an option for you now

The minimum age you normally have to be to access your pension savings.

Can I take as much income as I like now?

Yes, you can - by moving to flexi-access drawdown. Just complete our Accessing Your Pensions Savings form or write to us. But remember there are advantages to capped drawdown.

  • By taking an income within your cap you are less likely to run out of money.

  • Any income is taxed at your marginal rate(s) of tax. The more you take the more tax you are likely to pay and your income tax band may increase.

  • If you stick within your cap you still have an annual allowance for new pension savings of £40,000. If you don’t this falls to £10,000.

Important information

Before you choose a SIPP, make sure you understand its aims and risks. Alliance Trust does not give advice. If you are unsure whether our SIPP is suitable for you, of the risks and commitments of investments and or of how much income to take and when, you should seek professional financial advice specific to your particular circumstances.

Read our guide to accessing your pension savings

Download guide


Case Study 1

John is happy with his cap

  • Name: John

  • Age: 60

  • £150,000 in a SIPP

John started his capped drawdown just before April 2015. His current maximum is £11,475 a year but he only actually takes out £6,000.

John’s SIPP is his main source of retirement income until he reaches state pension age so he is happy to stay in capped drawdown.


Case Study 2

Isla is looking for more

  • Name: Isla

  • Age: 65

  • £500,000 in a SIPP

Isla has been taking her maximum income of £35,000 a year under capped drawdown since she was 60. She is also still saving £20,000 a year (gross) to her pension but is retiring soon.

Isla decides she wants to take out more than her £35,000 maximum in the first few years of her retirement. So she moves into flexi-access drawdown. Isla understands that means her annual allowance for pension savings goes down to £10,000 a year, but that is not an issue as she no longer has the earnings to support the savings she used to make. Isla also understands she has to pay tax on the extra income taken and this could impact her marginal rate of tax and mean a bigger tax bill.

These case studies are examples only and do not give advice.


Why save with Alliance Trust Savings:

  • No set-up fees

  • Low monthly charge of £15* (plus VAT). This equates to 180 (plus VAT) annually - a provider charging 0.45% a year on a £100,000 pot means a charge of £450 a year.

  • Manage your SIPP online

  • Wide investment choice

* If you opened a SIPP Account before 1 May 2016 these charges will apply to you from 1 February 2017. In your case we will collect an Account charge in advance for the period up to 31 January 2017. This will be the appropriate proportion of the yearly Account charge for SIPP that we used to collect on 1 February each year (£155 plus VAT for 'Savings' and £230 plus VAT for 'Income').

Important information

Laws and tax rules may change in the future without notice. The information here is our understanding in April 2016. This information takes no account of your personal circumstances which may have an impact on tax treatment.

Other charges may apply. For a full list of charges see our charges guide.

How much could your SIPP be worth?

Use our savings tool to work out how much you might be able to save for retirement.
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Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings gives no financial or investment advice.