If someone converts their capped drawdown arrangement to flexi-access drawdown on or after 6 April 2015 by taking income above the maximum GAD limit, this will trigger the money purchase annual allowance (MPAA) immediately. If someone remains in capped drawdown and does not flexibly access any pension benefits elsewhere (for example, by taking an uncrystallised funds pension lump sum (UFPLS) or by taking income from flexi-access drawdown), then the standard annual allowance will apply. Further information can be found in our Annual allowance FAQs. This means that the member would not be subject to the money purchase annual allowance (‘MPAA’) provisions (unless they had flexibly accessed pension rights under a different arrangement). The main advantage of remaining under the capped drawdown rules is that taking income within the GAD limit from a capped drawdown arrangement does not count as having flexibly accessed pension rights.
The recalculation does not change the duration of the review period, and the arrangement will continue under the capped drawdown rules. If it is not higher, it will apply from the beginning of the next pension year. The new maximum will apply immediately if it is higher. When topping up a capped drawdown arrangement, the additional designation will cause the maximum income available, calculated at 150% of the GAD rate, to be reset for the remainder of the review period. Yes, provided the additional designation is made to their existing capped drawdown arrangement rather than creating a new drawdown arrangement under the scheme.
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