• The Pensions Advisory
    Service is provided by

Call: 0800 011 3797

Call: 0800 011 3797


New rules for income drawdown

The 2014 budget introduced some changes which mean that more people may be able to use 'income drawdown' instead of buying an annuity.  The changes come into force from 27 March 2014. 

What is income drawdown? 

Income drawdown is where you leave your pot invested and take an income directly from it, instead of using the money in your pot to buy an income (an annuity) from an insurance company. Income drawdown is also known as an unsecured pension. 

As the rest of your pot remains invested, it will continue to benefit from any investment growth. 

There are two types of income drawdown - capped which means that there are limits on how much you can take out each year and flexible where you can take out as much as you like, provided that you meet certain conditions. 

What has changed? 

Capped drawdown 

Under the old rules, each year you were allowed to withdraw up to 120% of an amount worked out by the Government Actuary's Department (GAD).  This amount is the annuity that a male of your age could get using your pension pot.  This limit has now been raised to 150% for all pension years starting on or after 27 March 2014, so you may be able to choose to take more money from your pot each year.  However, the rules of your scheme would need to allow this. 

Flexible drawdown 

In order to use flexible drawdown, which allows unlimited withdrawals from your pot, the old rules said that you needed to have a guaranteed income of £20,000 a year (before tax).  From 27 March 2014, this has been reduced to £12,000. 

Further information 

If you would like to know more about these changes, including the full conditions for using income drawdown, please click here.   

Our mission is to make pensions accessible to everyone, so if there is anything you do not understand, please contact us and we will be pleased to help.  To discuss any pension-related issue:  

  • Call our helpline on 0300 123 1047.
  • Talk to one of our advisers online here.
  • Use our web based enquiry form here.
We never contact our customers out of the blue
We're all ears How do you feel about the help you just received?

We would really appreciate a few minutes of your time.
Your feedback helps us create a better experience for you.