PSI12.2.18 - Benefits on Death after Retirement: Lump Sum Benefits and Pension Guarantees - Guarantee payments - Cost Of Living Increases

(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)

[PN12.10]

If the scheme rules provide for the member’s pension to increase each year by a fixed percentage the lump sum can reflect those increases which would have been paid had the pension continued. Any normal restrictions for the cost of living (should it fall below this level) can be ignored because of the impossibility of knowing the Retail Prices Index figures in advance. Schemes which base pensions increases on the Retail Prices Index cannot estimate future movements to that index but the guarantee payment may be based on the rate of pension in payment at the date of death.

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