PSI1.1.17 - Establishment and Administration of Retirement Benefits Schemes: Retirement Benefits Schemes - “Hancock” Annuities

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

A "Hancock" annuity is an immediate annuity purchased by an employer for an employee who is about to retire or who has already retired. It takes its name from a tax case "Hancock v General Reversionary and Investment Co. Ltd (7 TC 358)". This was about the tax allowance of the cost of buying an annuity to replace an employee's pension previously paid direct by the employer. The Life Office becomes responsible for paying the benefits on the due dates via the trustees, if the annuity is established under trust, or direct to the pensioner. Whilst the original "Hancock" concept is for payment of an annuity you will often find that the arrangement includes a lump sum. It is quite acceptable for all or part of the annuity to be commuted, subject to normal limits. Occasionally, a "Hancock" is bought through an existing exempt approved scheme. (See PSI5.3.15).