(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)
[PN10.45]
The buy-out contract should contain provisions which:
a. require that the benefits cannot be assigned except to meet a pension sharing on divorce order (see PSI3.5.4),
b. require that the contract cannot be assigned or surrendered except for the purpose of transferring the value (see Part 14 PSI14.1.1) or to allow the exercise of an open market option (see PSI17.1.12-13) or to meet a pension sharing on divorce order (see PSI3.5.4),
c. show the maximum extent to which benefits may be taken in lump sum form either by way of commutation or on death. The maximum lump sum by commutation must be expressed in monetary terms for pre-Finance Act 1989 members with continued rights in the scheme purchasing the buy-out policy. But the maximum for post-Finance Act 1989 members (viz without continued rights in the purchasing scheme) may be expressed as the greater of:
1. 3/80ths of final remuneration for each year of service (up to
40 years) to be expressed in monetary terms, and
2. 2.25 times the initial annual amount of the contract
holder's annuity before commutation or allocation.
