RPSM09102050 - Technical Pages:
Member benefits: An unsecured pension: Overview: Partial
vesting
Partial vesting (fund designation) and the unsecured pension
fund
Designation and additional fund designation
The member does not have to generate an
unsecured pension from all the funds held in an
arrangement. The member can choose to use only a
proportion of the funds held in an arrangement to generate such a
pension.
This is referred to in the legislation as member designation.
The member designates the level of funds they want to be made
available under an arrangement to provide an unsecured pension, and
then they may add to this fund at a later date. This is referred to
in the legislation as ‘additional fund
designation’.
What forms part of the unsecured pension fund
| [Para 8 and 8(1A), Sch 28][Para 18(2) and (3), Sch 10, FA
2005] |
The
unsecured pension fund is the fund (the
‘sums and assets’) that has at any time been designated
as available under a
money purchase arrangement for the payment of
unsecured pension to that member. These funds are referred to in
the legislation as ‘member-designated funds’.
Once sums or assets have been designated as part of a
member’s unsecured pension fund any capital growth or income
generated is treated as being part of that unsecured pension fund.
Similarly where assets are purchased at a later date from those
funds those replacement assets also fall as part of the
member’s unsecured pension fund (as do any future growth or
income generated by those assets or sums). Any sums generated by
the sale of assets held in those funds are part of the unsecured
pension fund. This is because that growth or income and those
replacement assets are derived from those ‘designated’
funds (whether directly or indirectly).
Any funds that are subsequently applied from those designated
funds to purchase a
lifetime annuity contract from an
insurance company, or are applied to provide a
scheme pension, fall out of the definition of an
unsecured pension fund. Any funds used to purchase a
short-term annuity contract or that are applied in
paying income withdrawal to the member are no longer part of the
unsecured pension fund.
