RPSM09103090 - Technical Pages: Member benefits: An alternatively secured pension: Purchasing a lifetime annuity

Purchase of a lifetime annuity contract from an alternatively secured pension fund (or application of such funds to provide a scheme pension)

The member may choose to use some or all of their alternatively secured pension fund to secure a lifetime annuity at any time after the age of 75. The lifetime annuity contract must adhere to the same conditions and guidelines as detailed in RPSM09101710 to RPSM09101760. The contract may not provide annuity protection, but may be guaranteed for up to a ten year term.

The purchase of a lifetime annuity contract has no effect on the levels of alternativelysecured pension that may be drawn in the pension year the purchase took place in. The maximum amount of pension that may be taken from the alternatively secured pension fund stays the same for that pension year. The purchase of the annuity will be taken into account when the review at the start of the next pension year takes place.

The same principles where all or part of an alternatively secured pension fund is applied to provide a scheme pension.

Example

Kevin is drawing an alternatively secured pension. He is in the middle of a pension year with a maximum pension for that period of £7,000.

Kevin decides to use half his fund to secure a lifetime annuity contract. The purchase of the lifetime annuity contract does not effect what he can draw from the fund. At the point of purchase he has drawn £3,500 of alternatively secured pension in his current pension year, and may draw a further £3,500 in the remaining months.

A review of the limit will take place as normal on 5 September 2009 (the first day of the next pension year). This revised limit will reflect the reduced fund size.

Scheme wound-up

If a registered pension scheme paying out an alternatively secured pension is wound up, any alternatively secured pension fund held in respect of a member must be used to secure a lifetime annuity for that member, or be transferred to another scheme as set out in RPSM09103160.