RPSM09300050 - Scheme Administrator Pages: Member benefits: Pension benefits

This guidance only covers pension entitlements that arose before 6 April 2011. If the member reached age 75 between 22 June 2010 and 5 April 2011 you should also read the guidance in RPSM17100000 onwards.

See RPSM09103500 if the member became entitled to their pension on or after 6 April 2011.

Income withdrawal

If the member wishes to take advantage of income withdrawal, you should pay the unsecured pension direct from the arrangement. The funds continue to be held within the scheme itself.

The maximum amount of unsecured pension that can be authorised under the tax rules is found by using GAD tables. GAD provide separate tables for men (Table 1) and women (Table 2), broadly reflecting the differences in annuity levels that may be obtained on the open market for the different sexes (due to the differences in life expectancy). Tables 1 and 2 apply to men and women respectively, and start from age 23. Table 3 is for anyone under 23, typically this will be used for children where a dependants’ unsecured pension is being paid. The resulting figure is used in a calculation explained at RPSM09102330 and RPSM09102340 to arrive at the ‘basis amount’. The member can be paid up to 120% of that figure per year (after age 75 the percentage reduces to 90% of the basis amount). The table lookup and calculation must be repeated at certain intervals as the pensioner ages (see RPSM09102410 for the requirement before 75, and RPSM09103060 for the individuals over 75).

These tables are designed to provide a measure of the annual amount of lifetime annuity income an unsecured pension fund (or alternatively secured pension fund where the member is over 75) can generate for the member at the point of calculation, assuming the annuity

• would provide a level income for the pensioner,
• with no guarantee, and
• no provision for a continuing dependants’ annuity on their death, i.e. it is a single life rather than a joint-life contract.

This is referred to in the legislation as the level of ‘relevant annuity’ the fund could purchase for the pensioner on that particular date.