RPSM10104060 - Technical Pages: Death benefits: Pensions: Main principles: Guarantee on an unsecured pension

Guarantee where an unsecured pension is being drawn

An entitlement to income withdrawal through the unsecured pension rules cannot be guaranteed. Such value protection is not needed, because any remaining unsecured pension fund may be paid out as an unsecured pension fund lump sum death benefit if the member dies before age 75 (see RPSM10105330).

Where a short-term annuity is purchased, the insurance company takes the funds in return for providing the annuity income, so the funds used to purchase the annuity are lost to the unsecured pension fund. An unsecured pension fund lump sum death benefit is therefore not an option in relation to these rights. So the legislation allows for that contract to be guaranteed, giving the member the option to choose an element of capital protection.

Similarly, income withdrawal being paid as an alternatively secured pension may be guaranteed beyond age 75, as the return of fund option is not available in this situation. ( RPSM09103170 explains the options on death here.)