PSI25.1.5 - Flexibility in Pension Provision – Introduction – Limited Price Indexation

(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)

The DWP has confirmed that the rules on LPI do not apply to income drawdown from the scheme but do apply when an annuity is purchased. LPI should be applied to the eventual pension in the same way as would have been the case had the purchase of the annuity not been deferred. So, for example, if at retirement half the fund was attributable to payments made in respect of employment on or after 6 April 1997, then half the fund as it stands following annuity deferral should be used to provide an LPI indexed pension.