RPSM09202060 - Member pages: Member benefits: Pension benefits from a defined contribution or cash balance arrangement: Short term annuity contracts

This guidance only covers pension entitlements that arose before 6 April 2011. If the pension entitlement arose on or after 6 April 2011 see RPSM09103500.

A short term annuity contract

You may choose to secure part (or all) of your unsecured pension through the purchase of a short-term annuity contract from an insurance company.

Unlike income withdrawal the pension secured through the contract will be paid direct by an insurance company (rather than the scheme administrator) to you. The unsecured pension fund held in the arrangement will be reduced by the purchase price when the contract is purchased.

The term of the annuity contract cannot be more than five years, and the annual amount payable by the contract is bound by the same rules as income withdrawal payments paid direct from the scheme to yourself. If the annuity was purchased before 22 June 2010 the term of that annuity must not extend beyond your 75th birthday. The short-term annuity contract option may give you the opportunity to reassess your pension needs periodically and to choose alternative types of annuities - see RPSM09102200.