RPSM09103108 - Technical Pages: Member benefits: An alternatively secured pension: Member cannot be traced at age 75

This guidance only covers members who became entitled to an alternatively secured 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 reached age 75 on or after 6 April 2011 then see the guidance at RPSM09103500.

Member cannot be traced at age 75 before 6 April 2011 and transition to drawdown pension

If on a member’s 75^t h birthday the scheme administrator, after taking reasonable steps, has not been able to ascertain their whereabouts, any funds which were not previously designated by the member into unsecured pension will not automatically be treated as becoming held in an alternatively secured pension fund (see RPSM09103010).

Instead the funds will be treated as being held ‘in suspense’ until a pension has been established in one of the ways explained below, after the member has ultimately been traced. The scheme may continue to manage the investment of the funds as normal during the suspense period - the term ‘in suspense’ is merely a categorisation under the tax rules meaning that the fund is not an alternatively secured pension fund.

Even though the funds go ‘into suspense’ in these circumstances, any such funds which had not previously been designated by the member into unsecured pension will still be tested against the lifetime allowance at the member’s 75^t h birthday in the way explained on RPSM11102080 (BCE 1 on deemed designation).

Once the member has been traced they have a period of six months to either:

• elect for the fund to be treated as an alternatively secured pension fund at the expiry of the six month period - in which case the ‘suspense period’ ends at the expiry of the six month period, or
• purchase a lifetime annuity - in which case the ‘suspense period’ ends when the member becomes actually entitled (see RPSM11102050) to that lifetime annuity, or
• take up the option of a scheme pension - in which case the ‘suspense period’ ends when the member becomes actually entitled (see RPSM11102050) to that scheme pension.

If they do nothing then the fund will be treated as an alternatively secured pension fund on the expiry of the six month period.

While the funds remain ‘in suspense’, any payments made from the fund will be treated as unauthorised payments. And once the member has been traced, the only authorised pension that may commence to be paid within the six month period is a scheme pension or lifetime annuity.

For the avoidance of doubt, the member will not have become entitled to receive a pension commencement lump sum in relation to the uncrystallised funds that were tested for lifetime allowance at the deemed designation (see RPSM09104130 and RPSM09104140).

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Changes after 6 April 2011:

What happens in respect of a member aged 75 or over who is still untraceable on 5 April 2011 and is then subsequently traced?

On 5 April 2011 the suspended member’s unsecured pension fund becomes a suspended drawdown pension fund and remains suspended. Once they are traced a drawdown pension year starts under the new rules from the date that their whereabouts is established.

What happens if member aged over age 75 is traced up to 6 months prior to 5 April 2011?

They start a drawdown pension year under the new rules from 6 April 2011.