RPSM09300020 - Scheme Administrator Pages: Member benefits: Pension benefits

Scheme pension

As scheme administrator you may wish to offer the member a secured pension from the scheme and either pay the pension yourself or arrange for an insurance company to do so on your behalf. Where you do decide to have an insurance company pay the pension on your behalf, the contract may be in the name of the scheme trustees or in the name of the member. This pension must:

• be paid for the member's lifetime (so the scheme is committed to pay),
• be paid at least annually,
• not be capable of being reduced from one year to another (except in limited circumstances - see RPSM09101510).

You may also make provision for the pension to be:

• increased annually, usually based on some agreed method such as the increase in RPI,
• guaranteed to continue to be paid to another person after the member’s death (the guarantee can be for a period of up to 10 years), or alternatively, it can be arranged that if they were to die before the age of 75, any outstanding pension payments are paid out as a lump sum. It is possible for a scheme to provide both alternatives; however, a pension that is guaranteed to continue in payment cannot normally be converted into lump sum.

From 6 April 2011 certain lump sum death benefits can be paid even if the member is 75 or older when they die. So a scheme pension guarantee may be paid as a lump sum if the member is 75 or older when they die. See RPSM10106000 for more information on the payment rules for lump sum death benefits where the member dies on or after 6 April 2011.