RPSM09103130 - Technical Pages: Member benefits: An alternatively secured pension: Example of guarantee

An example of how a guarantee works with an alternatively secured pension where the member dies before 6 April 2007

Mark starts drawing an alternatively secured pension on his 75th birthday, 1 October 2006. The first (alternatively secured) pension year therefore runs from 1 October 2006 to 30 September 2007. The second pension year runs from 1 October 2007 to 30 September 2008 and so on.

Mark’s alternatively secured pension is guaranteed for ten years, until the end of his tenth pension year. These payments will continue under the terms of the arrangement to his wife.

On 1 March 2007 Mark dies – during his first (alternatively secured) pension year.

Supposing the limit for his first pension year is £10,000 and he has already drawn £4,000 of income withdrawals in that pension year. Mark’s wife can draw another £6,000 between 1 March 2007 and 30 September 2007.

Payments continue for the next nine pension years, starting with 1 October 2007.

The maximum guarantee that can be paid in each pension year is calculated on the first day of that year (using the sixty-day window if needed), based on the level of alternatively secured pension fund left on that ‘nominated date’. The basis amount is obtained from the GAD tables, as it would be if Mark were still alive (so obtaining the maximum under the tables for a male aged 75). It is not obtained on the basis of his wife’s age and sex.