PSI25.2.9 - Flexibility in Pension Provision – Annuity Deferral/Income Drawdown – Insured Money Purchase Schemes and Buy–Out (Section 32) Contracts

(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 income drawdown has been chosen by the member/survivor and the scheme is insured, partial surrender of the policies underwriting the scheme or the buy–out contract will be involved. The surrender should be sufficient to release money to pay the member's retirement lump sum (if any) and up to one year's instalments of pension. At the end of each year a further part surrender would take place to provide the funds to pay the pension for the next year. More frequent partial surrender (i.e. monthly) is also acceptable.

It should be noted that any funds invested by the trustees other than in insurance policies could bring the scheme within the definition of 'Small Self-administered Scheme' under the Retirement Benefits Scheme (Restriction on Discretion to Approve) (Small Self-administered Schemes) Regulations 1991 (SI 1991 No 1614).