The member is capped at the amount they can take out of the pension each year.

The maximum each year is expressed as a percentage of an equivalent annuity that could be purchased with the member’s drawdown pension fund

This equivalent annuity is known as the basis amount and the maximum income level is set at 150% of the basis amount. Any unused allowance cannot be carried forward.

The annuity rates used in calculating the basis amount are found in a set of tables produced for HMRC by the Government Actuary’s Department (known as the GAD Tables).

The rates in the GAD Tables are based on 15-year gilt yields (unless the withdrawal is for a dependant aged under 23, in which case five-year gilt yields are used) and a notional annuity which is:

• Level in payment
• Single life basis
• Payable monthly in arrears
• No guarantee period

The maximum amount permitted is calculated as follows:

1. Calculate the member’s age in whole years as at the reference date
2. Obtain the gross redemption yield on UK gilts (15 years) for the fifteenth of the month preceding the month of the reference date
3. If the yield is not an exact multiple of 0.25% then round it down to the next 0.25%.
4. Using the age from Step 1 and yield from Step 3, look up the maximum withdrawal rate in the male (regardless of gender) GAD table
5. The GAD rates are expressed as an amount of income per £1,000 (e.g. £56 per £1,000). To determine the maximum withdrawal, apply this rate to the fund net of PCLS and multiply by 150%, rounded to the nearest whole penny.