RPSM09102060 - Technical Pages: Member benefits: An unsecured pension: Overview: Additional fund designation
This guidance only covers members who became entitled to an unsecured pension before 6 April 2011. If the member became entitled to their pension on or after 6 April 2011 then see the guidance at RPSM09103500.
Partial vesting: uncrystallised funds and additional fund designation
| [Para 8(3) and 10(8), Sch 28] |
The funds held in an arrangement that the member has chosen not to draw as benefits are referred to in the legislation as ‘relevant uncrystallised funds’.
There is only one unsecured pension fund within an arrangement. Where the member chooses to generate further unsecured pension from some or all of these uncrystallised funds, the newly designated funds are simply absorbed into the existing unsecured pension fund in that arrangement.
The limit placed on unsecured pension levels is measured against the level of funds held in that unsecured pension fund at an initial calculation point, and later at set review points or triggers. Where the member designates more uncrystallised funds to be used to generate unsecured pension the additional fund designation triggers a recalculation of the unsecured pension limit. The amount of unsecured pension that can be paid will increase to reflect the increase in the size of the unsecured pension fund.
If the member holds more than one arrangement under the scheme each arrangement will have their own ring-fenced and distinct level of uncrystallised funds and/or unsecured pension fund.
For the avoidance of doubt, the transfer of unsecured pension fund to another registered pension scheme will never represent an additional fund designation. Such a transfer must go to a fresh arrangement (where no existing uncrystallised funds or unsecured pension funds are already held) - see RPSM09102150.
Example
Lisa has £20,000 held in a money purchase arrangement. She decides to draw benefits from only £10,000 of the funds held in her arrangement as income withdrawal. Lisa elects to draw the maximum pension commencement lump sum (£2,500) and use £7,500 to generate an unsecured pension.
That £7,500 represents the unsecured pension fund, and the remaining untouched £10,000 represents uncrystallised funds.
At a later date Lisa can decide to boost her income by using the remaining funds held within the arrangement. She would designate the uncrystallised funds be made available to provide unsecured pension and so be absorbed into the unsecured pension fund. Lisa could also take an additional pension commencement lump sum. This ‘additional fund designation’ will trigger a review of the unsecured pension limit, to reflect the boost to the unsecured pension fund.
| Glossary (RPSM20000000) |
