PSI13.4.1 - Withdrawal from Service: Deferred Benefits under Individual Policies (Buy-Out Policies) - Bought-Out Benefits

(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)

[PN10.37]

An early leaver's deferred benefits may be provided by the scheme itself or, if the rules permit, by means of "buying-out" (see PSI13.1.3c and PSI13.1.9b). Buying out is normally accomplished as follows:

(This text has been withheld because of exemptions in the Freedom of Information Act 2000)

1. Where the employee's benefits are secured by an individually earmarked insurance policy or policies, by the surrender of the policy or policies and the utilisation of the proceeds to purchase a deferred annuity in the employee's name from a Life Office of his or her choice. Such policies are known as "buy-out".
2. Where the scheme secures benefits through a group policy or is self- administered, the administrator will realise sufficient funds to purchase a deferred annuity as in (a) above.