PSI13.4.9 - Withdrawal from Service: Deferred Benefits under Individual Policies (Buy-Out Policies) - Permitted Provisions
(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)
[PN10.47(a)]
The contract may provide for:
a. benefits to come into payment at any time between the attainment of age 50 (or earlier on grounds of incapacity) and the attainment of age 75. Where, however, a member's rights under the scheme are represented by two or more buy-out policies, those policies must require that benefits under all such policies are to come into payment simultaneously. When the insurer issues a buy-out policy it should find out whether that policy represents all of the member's benefits from the scheme in question, or whether other buy-out policies have been purchased (and if so from which insurers). When the member claims his or her retirement benefits, the insurer should check with the others that they too are bringing the benefits into payment;
[PN10.47(b)]
b. full commutation on grounds of triviality or exceptional circumstances of serious ill health. Where such provision is included the contract must also require the insurance company to account to the Inland Revenue for any tax liability arising therefrom (see PSI17.2.23-24);
[PN10.47(c)]
c. where no accrued rights to GMP are involved (see PSI6.1.10) a contract may include provision for it to be assigned or surrendered to provide for a pension sharing on divorce order (see PSI3.5.4), or a transfer value to a personal pension scheme (together, where appropriate, with a certificate under regulation 6(3) SI 1988 No 1014 and any lump sum certificate for the purpose of the same Regulations – the amount certified in the lump sum certificate must take account of the effects of a pension debit where applicable (see PSI14.2.58)), or an approved scheme, or a scheme being considered for approval, or a Relevant Statutory Scheme of which the individual subsequently becomes a member. The contract must however specify that any transfer payment is to be made direct to the scheme concerned;
[PN10.47(c)]
d. where a contract secures accrued rights to a GMP (see PSI6.1.10) it may include a similar provision to that in c. above provided that the receiving scheme is able and willing to accept the liability to pay the GMP. Where the receiving scheme is unable or unwilling to do so, the excess of total proceeds over those necessary to secure the GMP may be transferred; and
[PN10.47(e)]
e. lump sump death benefits payable under the contract to be subject to discretionary trusts. Such trusts may be effective from the outset of the contract or may be introduced at a later date than that on which the contract was taken out.
[PN10.47(f)]
- A facility to defer the purchase of an annuity and in the meantime pay pensions by income drawdown (see PSI Part 25 Section 2).
