RPSM09103010 - Technical Pages: Member benefits: An alternatively secured pension: Payment after age 75

Payment of an alternatively secured pension after age 75

[s165(1), ‘Pension rules 6 and 7’][Paras 11 to 14,Sch 28]

Once a member reaches the age of 75 a pension may only be provided for the life of that member, either through the purchase or provision of a secured pension or, if benefits are from a money purchase arrangement, as an alternatively secured pension.

An alternatively secured pension is the payment of income withdrawals beyond the member’s 75th birthday. It will be subject to more restrictive rules on the maximum pension that can be paid and a more rigid and frequent review of that limit than unsecured pension. There are also more stringent rules on what benefits can be paid on the death of the member where in receipt of an alternatively secured pension (see RPSM09103170).

Alternatively secured pension fund and fund designation

[Para 11(1) to (4) (5) to (6), Sch 28][Para 20(2) and 3), Sch 10, FA 2005]

The funds used to generate an alternatively secured pension for the member are referred to as the alternatively secured pension fund. Unless a secured pension is being provided or the member cannot be traced (see RPSM09103108) all funds held within a money purchase arrangement at the member’s 75th birthday will become alternatively secured pension fund at that point. The effective date of this switch will be the point the member reaches age 75, which is immediately after midnight (00:01 hrs) on their 75th birthday.

There are limited circumstances where the initial entitlement to an alternatively secured pension will arise after the member’s 75th birthday. These circumstances are detailed in RPSM09103100. RPSM09103160 deals with the position on transfers.

Once sums or assets have been 'designated' into a member’s alternatively secured pension fund any capital growth or income is treated as being part of that alternatively secured pension fund. Similarly, where assets are purchased at a later date from such funds those replacement assets also fall as part of the member’s alternatively secured pension fund (as do any future growth or income generated by those assets). Any sums generated by the sale of assets held in those funds also form part of the alternatively secured pension fund. This is because that growth or income and those replacement assets are derived from that alternatively secured pension fund.

Any funds that are subsequently applied to purchase a lifetime annuity contract from an insurance company, or are applied to provide a scheme pension, will cease to be part of the alternatively secured pension fund.

RPSM09103020 gives an example of payment of an alternatively secured pension.