RPSM09103060 - Technical Pages: Member benefits: An alternatively secured pension: Review of limits

Review of alternatively secured pension limits

Annual limit

The minimum and maximum level of alternatively secured pension must be recalculated every year at the beginning of each pension year, based on the level of alternatively secured pension fund held in the arrangement at that point.

Example

Alan draws an alternatively secured pension from his 75th birthday on 9 May 2007. His pension years therefore run from

9 May 2007 to 8 May 2008 (the first alternatively secured pension year)

9 May 2008 to 8 May 2009 (the second alternatively secured pension year)

9 May 2009 to 8 May 2010 (the third alternatively secured pension year) etc.

The scheme administrator makes the initial calculation on 9 May 2007, which applies for the first pension year.

A recalculation must be done on 9 May 2008, 9 May 2009 etc. These revised limits will apply for each following pension year.

Relevant annuity calculation always based on same age

The scheme administrator must calculate the minimum and maximum level of alternatively secured pension at the beginning of each pension year by reference to the GAD tables assuming that the member is still aged 75 and not use their actual current age.

This helps to ensure that the alternatively secured pension fund will provide a pension income for the life of the member, as it depresses the level of the basis amount (the amount of lifetime annuity a given sum would purchase will in theory be higher the older you get).

So in the above example, where the scheme administrator makes a recalculation of limits on 9 May 2008, 9 May 2009 etc. they will always do so assuming that Alan is still aged 75.