Capped Pension Income Drawdown (Income Drawdown) GAD Calculator - work out the maximum income you can take from a drawdown pension plan that commenced before April 2015.
Click here to launch the calculator
The purpose of this calculator is work out the maximum income that you could take from a Drawdown Pension plan that commenced before April 2015, based upon relevant factors, such as your age, gender and the current Gilt Index Yield. The are two main options within the calculator:
- Calculate Income Withdrawals from a given pension fund value(s)
- Work out limits from known GAD factors
IMPORTANT NOTE
This calculator is only to be used for Capped Drawdown contracts that commenced before April 2015. For all contracts that commenced or were altered after April 2015, use the Flexi-Access Drawdown Calculator.
In most cases, no tax-free lump sum should be entered, as this is likely to already have been accessed, although the facility to enter one still exists if doing a historical calculation.
This calculator has been updated to take into account the legislative changes that came into force between April 2011 and 2015, although it is still possible to do calculations using the old tables if you enter a date before 06 April 2011. It also takes into account the recent rule changes with regard to the European Court of Justice ruling forbidding the use of gender as a risk factor in insurance transactions.
It has also been updated to reflect the fact that upper limits on withdrawals has changed from 120% to 150% of the current GAD interest rate with effect from 27 March 2014. All new plans can use the 150% limit. Those already in drawdown who had a review between 06 April 2011 and 25 March 2013 and were forced to reduce withdrawals to 100% GAD can opt to use the new higher limit on the start of their next pension year that falls after 27 March 2014.
Also, the requirement to conduct a new review and set a new GAD maximum following a transfer of an existing drawdown plan has been abolished. All transfers after April 2015 are likely to be into a flexi-access drawdown contract.
Calculate Income Withdrawals from a given pension fund amount
This is the main method that is used to calculate a maximum income allowable from a given pension fund. You will need to input:
- Your gender / status. Normally this will either be male or female, but there is another entry relating to children or adults under the age of 23 - this narrow option relates to people who are taking a survivor's pension (death benefits) by way of pension fund withdrawal.
- Your age at the reference date (see further sections below).
- The reference date of the calculation. This is set to today's date by default. You can do calculations based on previous dates (but not before 06 April 2006).
- The fund values / transfer values of the pension funds that you plan to take a direct income from.
- Any tax-free lump sum you plan to take from your pension funds. Either leave it at the default value of 25% of the fund values, or enter a specific value in the adjacent input box. If you have already taken the maximum tax-free lump sum from your pension funds, uncheck the 'maximum lump sum' checkbox, and set the value in the adjacent input box to 0.
Work out limits from known GAD factors
This option is likely to be used less frequently, but it enables you to do a quick 'look-up' on the GAD Tables, and work out the maximum income per £1,000 of pension fund. You will need to input:
- Your gender / status.
- Your age at the reference date.
- The Gilt Index Yield at the reference date (see below for more details).
Drawdown Pension - General Points.
If you want a more detailed overview of the subject, please view the page about Drawdown Pension.
If you have come this far, we are assuming that you have some knowledge about how income withdrawal works, and the following notes deal with points mainly relating to the calculator.
What is 'income withdrawal'
Before 1995, the only pension options were a company pension scheme for the lucky, and an annuity for individuals with private pension funds. Then in 1995, it was decided to allow individuals to draw an income directly from their pension funds (within certain limits), and was given the name 'income drawdown'. The was changed a few years later to 'pension fund withdrawal', but the term 'income drawdown' was still widely used, and still is even to this day.
After the pension simplification changes of April 2006, another definition was applied - namely 'unsecured income'. This is to reflect the fact that pension income was either 'secured' or 'unsecured'. A 'secured' pension reflects the fact that there is some form of security or guarantee behind the pension payments (which will be usually fixed) - i.e. an annuity or Final Salary company pension would be described as 'secured'. However, as a Pension Fund Withdrawal contract remains invested, and therefore the value of the investments can go up and down, it does not provide the same level of security as a secured pension - hence the title 'unsecured'.
From April 2011-5, the following changes came into being. The main points are:
- The compulsion to purchase an annuity at age 75 has been dropped. There is no upper age restriction.
- The maximum GAD level dropped from 120% to 100%. The minimum GAD still remains at 0% (But on 26 March 2013 this was reversed, and the limit went back up to 120% then up to 150% in 2014 where it remains)
- Review periods have reduced from 5 years to 3 years, then annually after age 75
- Any lump sum passed on at death were taxed at the rate of 55%; This was previously taxed at the rate of 35%. This has been significantly altered as of April 2015 and is based upon age at death. If death occurs below age 75, funds can be passed on completely tax-free. After age 75, any beneficiary can continue taking drawdown income at their marginal rate of tax, but face a 45% charge if the fund is paid as a lump sum. Also, the fund can be passed to any beneficiary, not just a 'dependent'
- There is an additional option of taking Flexible Drawdown where you can take unlimited income with no upper limits. This is the new form of income drawdown after April 2015, but those already using capped drawdown will in most cases have to move to a new pension contract or convert an existing pension contract. See the page on Drawdown Pension for more details.
Reference Dates and Gilt Index Yields
It is important to input all the relevant details into this calculator in order to work out the maximum allowable income accurately. This section will describe the relevance of the individual factors.
The 'reference date' of the calculation refers to the date when pension funds are 'crystalised' and you actually start to draw an income from the pension fund(s). Therefore, if you are just working out an estimate or an indicative figure, use today's date. Also use today's date if you are in the process of taking the benefits from a pension fund via withdrawals. However, because of the time delays that can and do occur when setting up such an arrangement (as pension funds are often transferred between different administrators and insurance companies), the reference date ultimately used may only be known in the future.
The main factor in working out the income that can be taken from a pension fund withdrawal plan is the current Gilt Index Yield. The yield that is used in any given month is the yield on 15-Year Gilts as published in the Financial Times on the 15th day (or the next available date if the 15th falls on a weekend) of the previous month, and rounded down to the nearest quarter of a percent (unless it is an exact quarter of one percent anyway) and rounded down to the nearest quarter of a percent (unless it is an exact quarter of one percent anyway).
Therefore, if you are calculating figures based on an earlier reference date, it is likely that the gilt index yield used will be different from this month's yield.
As most annuities are secured by insurance companies by the purchase of Gilts to meet their long-term liabilities, annuity rates at any given time are sensitive to changes in Gilt Yields. Because the maximum income that can be taken from a pension fund withdrawal contract is based upon the equivalent on the equivalent income that could be received if you had purchased an annuity instead, the upper income limits that are set for the next three years upon entering an PFW contract are calculated partly by the current gilt index yield. (After age 75, the limits are calculated annually)
Once the gilt index yield is known, it is necessary to reference tables provided by the Government Actuaries Department (GAD), and look up the maximum income that can be taken per £1,000 based upon this index yield and your age. There are three separate tables for men, women and children / adults aged under 23.
Once the basic amount of income per £1,000 of pension fund is known, the maximum income withdrawal is 100% of this figure, and the minimum amount is £0 per annum (this allows you to postpone taking income at any time if you do not need it).
Once the income limits are set, they are reviewed again exactly three years from the reference date, and the new limits will also depend upon the same factors - age, gender, Gilt Index Yield.
Please note: A new GAD table came into effect from 06 April 2011. Anyone who commences drawdown after this date will be subject to the new table, while those who commenced before this date can still take maximum income of up to 120% of GAD compared to 100% under the new rules. However, they will become subject to the new rules at the date of their next review, or if they transfer their plan to a new provider.
Results
This calculator works out results and factors on an 'Unsecured Income' basis. The 'Alternatively Secured Pension' basis is no longer applicable, as unsecured income can now carry on beyond the age of 75.
Important Points
Use of this calculator does not constitute a recommendation to use pension fund withdrawal. If you are considering going down this route, we recommend that you seek Independent Financial Advice in the first instance, as there may be more suitable options in your particular circumstances. If you are still in doubt, read through the consumer guidance sections within the Financial Services Authority website.
The figures projected by this calculator are only for guidance purposes - whilst we aim to ensure the accuracy of our calculators, we can take no responsibility for the usage made of the calculations generated on this site.
Source of GAD tables: HM Revenue & Customs
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