RPSM09102330 - Technical Pages: Member benefits: An unsecured pension: Limit on unsecured pensions: The basis amount

Calculating the basis amount

GAD tables

The scheme administrator calculates the basis amount by using the tables specifically compiled for this purpose by the Government Actuary’s Department ( GAD). These tables together with comprehensive instructions on their use are available from www.hmrc.gov.uk/pensionschemes/gad-tables.htm. In these circumstances the following is a brief outline on how the basis amount is calculated.

These tables are designed to provide a measure of the annual amount of lifetime annuity income an unsecured pension fund can generate for the member at the point of calculation, assuming the annuity

• would provide a level income for the member,
• 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 member on that particular date.

The relevant annuity rate obtained via the GAD tables is the basis amount.

The scheme administrator must use the GAD tables to obtain the relevant annuity rate (and hence establish the basis amount). They cannot use any other measure.

GAD provides separate tables for men and women, 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). They also provide a separate table for children, for use where a dependants’ unsecured pension is being paid to a child.

Any questions on the tables should be directed in the first instance to APSS (Nottingham) and not GAD.

When calculating the value of the unsecured pension fund at a particular time any liabilities of the scheme must be taken into account. So the ‘net’ value of any assets held in the fund should be used.

RPSM09102340 gives an example of calculating the basis amount for a woman aged 60. However this example also comments on any differences which should be taken account of when calculating a basis amount for a man or a dependent aged under 23