RPSM09102430 - Technical Pages: Member benefits: An unsecured pension: Review of the unsecured pension limit: Example of the 5 yearly review

This guidance only covers members who became entitled to an unsecured pension 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.

If the member became entitled to their pension on or after 6 April 2011 then see the guidance at RPSM09103500.

An example of a five year review of unsecured pension limits

Barbara has a money purchase arrangement holding funds of £200,000.

On her 60^t h birthday (1 October 2007) £100,000 is designated to provide unsecured pension.

The initial calculation is made on the date of designation, 1October 2007 and this sets the annual amount of income that may be drawn for the next 5 years. This is also the date a lifetime allowance test takes place.

The first pension year runs from 1October 2007 to 30September 2008. The second runs from 1October 2008 to 30September 2009, and so on, following the 1 October to 30 September pattern.

The first five-year formal review is the first day of the sixth pension year, 1 October 2012. The second five-year formal review will take place on the first day of the eleventh pension year, 1 October 2017.

There won’t be a third formal review, as this would fall on Barbara’s 75^t h birthday. By this time any unsecured pension fund will either have been used to provide a secured pension, or will have become the alternatively secured pension fund.

These formal review points will not change, whether or not the remaining uncrystallised funds are brought into the unsecured pension fund through additional fund designation, or a lifetime annuity is purchased with those unsecured pension funds (or a scheme pension provided).