PSI25.2.15 - Flexibility in Pension Provision – Annuity Deferral/Income Drawdown - Payment of a Pension/Annuity

(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)

Where a member dies within 10 years of the date of commencing income drawdown and no lump sum death benefit has been paid (excluding any lump sum payable under continued life cover), a pension or annuity may be paid. This applies to schemes which are contracted-in and applies regardless of the type of guarantee (if any) attaching to the pension. The pension or annuity may be paid to any individual at the discretion of the trustees. Payment may continue for a period of up to 10 years from the date on which the member commenced income drawdown. The amount must not exceed the maximum permissible annual pension payable to the member as at the date of commencement of income drawdown.

Where part of the member's benefits have been secured by a tranche of annuity prior to death, the amount of pension or annuity must be reduced by the amount of annuity already in payment. Additionally the pension or annuity must not exceed the value of the benefit which can be paid or purchased with the member's fund.