RPSM09103120 - Technical Pages: Member benefits: An alternatively secured pension: Guarantees

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.

Guaranteeing an alternatively secured pension

Guarantees are not available where a member entitled to alternatively secured pension dies on or after 6 April 2007.

However, where a member with an alternatively secured pension died before 6 April 2007 an alternatively secured pension may be guaranteed for up to ten years from the point entitlement to that pension first arises. Where the entitlement arises at age 75, the pension can be guaranteed up until the member’s 85 birthday. If the entitlement arose after age 75 a ten year guarantee can run from that point (unless that entitlement has arisen following a transfer - see RPSM09103160).

This means that income withdrawal payments may continue after the member’s death until the end of the original term. So the pension year the member dies in is not shortened and payments may continue to be paid in that pension year. The total payments made to the member and the recipient of the guarantee should be within the limit set at the beginning of that pension year.

Guarantees are explained in more detail on RPSM10104050.

How does the guarantee work for the following pension years?

Payments may continue within the existing pension year framework till the end of the guarantee period. The minimum and maximum limits for each pension year will continue to be re-calculated at the beginning of that year, based on the member’s sex and using age 75 as if the member was still alive. The age and sex of the recipient of the payments are not relevant.

The continuing payments can be paid to any person permitted in the scheme rules. They may not be commuted and paid as a lump sum. RPSM09103140 gives details on how the continuing payments will be taxed.

What happens to the alternatively secured pension fund at the end of the guarantee period?

At the end of the guarantee period, any remaining alternatively secured pension fund may be

• designated to provide any surviving dependants of the member with a dependants’ unsecured pension or a dependants’ alternatively secured pension (depending on their age at that time), or a dependants’ annuity or dependants’ scheme pension, or
• if there are no surviving dependants of the member, paid out as a charity lump sum death benefit or transfer lump sum death benefit (see RPSM10105310 and RPSM10105330).

RPSM09103130 gives an example of guaranteeing an alternatively secured pension.