View more on these topics

Changes to capped drawdown tables

The tables used for capped drawdown maximum income calculations have been updated. We look at the reasons for the change and what the impact could be.

Changes to capped drawdown tables

Capped income drawdown involves taking a pension directly from a fund instead of buying an annuity. However, there’s a limit on the maximum amount of income that can be withdrawn during a year and this limit is reviewed on a frequent basis. Tables are used to establish the maximum income available per £1,000 of an individual’s fund.

The tables have recently been updated and from 1 July 2017 the new drawdown tables should be used for any income calculations.

Why have the tables changed?

The current tables allow for a minimum 15-year UK gilt yield of 2 per cent.  In December 2011, HMRC published a newsletter stating that if 15-year UK gilt yields were to fall below 2 per cent, for the purposes of calculating the maximum income a minimum of 2 per cent should be used.  In recent months the actual yield has been below 2 per cent.

The new tables have been updated to allow for gilt yields between 0 per cent and 2 per cent and from 1 July 2017 the minimum of 2 per cent will no longer apply.

Also, there are now only two tables, one for those above the age of 23 and one for those below 23. This is just a tidying-up exercise by HMRC as the male table has been also been used for females since 21 December 2012 for those over age 23. There weren’t separate male and female tables for those under age 23.

What could the impact be?

The maximum amount of income that can be taken during a 'pension year' is 150 per cent of the Government Actuary's Department (or GAD, as it's affectionately known) relevant annuity with no guarantee taken from the tables. The individual can take any level of income they like from their fund up to this maximum limit.

Let’s take an example of someone aged 65 with a fund of £100,000 and assume gilt yields are 1.5 per cent. Under the pre-1 July basis, their maximum income would be £100,000 x ({53/1,000} x 150 per cent) = £7,950 per year. Using the new tables, the maximum income would be £100,000 x ({50/1,000} x 150 per cent) = £7,500 per year.  This is a difference of £450 per year or a reduction of 5.66 per cent.

In July and August 2014, the gilt yield was 3 per cent. Those facing a review in the early days of the new tables could well have been expecting to use a gilt yield of 2 per cent. They may now be faced with using a gilt yield of below 2 per cent, therefore facing a greater reduction than expected in their maximum income depending on their fund’s performance.


Drawdown tables

Pension schemes newsletter 84

Pension schemes newsletter 51

Historic gilt yields for drawdown



Mooted return of HIPs under fire from industry

Property experts have warned that a return of home information packs would be ill advised, amid renewed political interest in the topic. HIPs were brought in by the Labour government in August 2007 to add transparency to the house-selling process but were scrapped by the Conservative government in 2010. The packs came under fire for […]


The Mortgage Lenders forms partnership with Crystal Specialist Finance

The Mortgage Lender has added Crystal Specialist Finance to its network of distribution partners. The specialist distributor offers residential and commercial mortgages, bridging loans, second charge loans and development finance. Crystal Specialist Finance head of operations Kris Corns says: “We’re delighted to form this partnership with The Mortgage Lender and become a distribution partner. “Our […]


Exclusive: Private Label to return this summer

Former pioneering packager Private Label is being revived to target a perceived lack of innovation in the mortgage market, Mortgage Strategy understands. Private Label was known for thinking up and launching clever mortgage products in the 1990s and early 2000s. It was founded by mortgage veteran Stephen Knight in 1990, was bought by GMAC in […]

What triggers the MPAA?

Jim Grant – Senior Product Insight & Technical Support Analyst There’s sometimes confusion around what triggers the money purchase annual allowance. Find out what does and what doesn’t trigger the MPAA. The money purchase annual allowance (MPAA) is a reduced annual allowance that can apply to contributions to defined contribution (DC) schemes. The following table […]


News and expert analysis straight to your inbox

Sign up

Why register with Mortgage Strategy?

Mortgage Strategy continues to be the market-leading B2B mortgage publication in the UK, and provides trusted, independent insight with the aim of helping, promoting and analysing the latest developments for mortgage professionals.

News & analysis delivered directly to your inbox
Register today to receive our range of news alerts including daily and weekly briefings

Mortgage Strategy Events
Be the first to hear about our industry leading conferences, awards, webinars and more.

Research and insight
Take part in and see the results of Mortgage Strategy's flagship investigations into industry trends.

Have your say
Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

Register now