PSI25.2.8 - Flexibility in Pension Provision – Annuity Deferral/Income Drawdown - Recalculation of Maximum Annual Pension

(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)

A pension in payment under income drawdown must be reviewed at least once every 3 years. This must continue so long as the pension has not been fully secured by annuity purchase. More frequent reviews may also be made at the discretion of the scheme trustees (or Life Office in the case of a buy-out policy). Given that a pension for life has not been secured, the GAD tables should be applied to the remaining fund for the member or survivor to calculate the ongoing pension. Following this calculation, the member may choose afresh the amount of pension to take in the form of income drawdown so long as it is within 35% and 100% of the recalculated level (subject to the limits set out in PSI25.2.4). The amount may be varied annually within the range until the next review takes place.

Once income drawdown has commenced, an immediate recalculation must be made whenever:

• an employer makes an additional contribution to the member's fund for the benefit of the member, or
• the trustees increase the member's fund by re-allocating reversionary funds upon the predecease of a prospective dependant.
• The pension is partially or wholly secured by annuity purchase