PSI25.2.10 - Flexibility in Pension Provision – Annuity Deferral/Income Drawdown - Purchase of Annuities

(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)

An annuity (or the final tranche of an annuity in cases where annuity purchase is being phased – see PSI25.2.11) must be bought no later than the member reaching age 75. In the case of a survivor an annuity must be bought no later than the earlier of the survivor reaching age 75 or the date on which the deceased member would have attained age 75.

It is the choice of the member or survivor not the scheme trustees when to ask for an annuity to be purchased (so long as it is before age 75). The former requirement that it was for trustees of SSASs to decide the time to buy an annuity no longer applies.

When the member decides to purchase an annuity, whether in whole or in part, he/she may exercise an open market option and be given the choice of purchasing benefits in any approvable form. Any guarantee attaching to the annuity will need to take into account the time that has elapsed during the period of income drawdown.

At the point the full pension, or the final tranche of the pension, is secured by an annuity a further benefit check must be carried out and any identified surpluses dealt with as explained in PSI25.2.3. Any member's fund remaining after the completion of the final or sole annuity purchase should be dealt with as if it were a surplus arising on the member's retirement.