|[s165, ‘Pension rules 4 and 6’]|
scheme pension promise is offered through a
money purchase arrangement it must only be an
option open to the member. The member must always have the chance
to opt instead to use the funds held in the
arrangement to purchase a
lifetime annuity contract on the open market.
Whether to accept the scheme pension offer or go down the lifetime annuity route is one of a number of factors that the individual must consider when deciding how to draw their pension income. These will be important decisions, on which many people may need to take financial advice. An individual might want to decline the scheme pension offer because they can get a higher, or more flexible, level of pension from a lifetime annuity contract, or because they want to buy a particular type of contract.
If the member has not got that right to decline the scheme pension and use the funds accrued to purchase a lifetime annuity contract the resulting pension will not be within the authorised pension rules. Those pension payments will represent unauthorised member payments, and be taxed as such.
RPSM09101460 gives an example.
|Glossary ( RPSM20000000)|