Pension benefits from a defined contributions pension scheme (before 6 April 2015)

By Tolley
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The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Pension benefits from a defined contributions pension scheme (before 6 April 2015)
  • Introduction
  • Unsecured Income – 6 April 2006 to 5 April 2011
  • Alternatively Secured Pension – 6 April 2006 to 5 April 2011
  • Flexible drawdown and Capped drawdown from 6 April 2011 to 5 April 2015

Introduction

Members of an occupational defined contribution schemes may take pension benefits in the form of a scheme pension, a lifetime annuity, or in the form of income drawdown.

Scheme pension

The pension is provided from the registered pension scheme, or from an insurance company selected by the scheme administrator. A scheme pension may be guaranteed for a certain term not exceeding 10 years. So if the member dies before that term has ended the scheme pension will continue to be paid regardless to the end of the guarantee period, but to another person or to the deceased's estate. The 10-year maximum period runs from the date the member first becomes entitled to the scheme pension.

Lifetime annuity

This is an annuity payable as a consequence of the annuity being secured through an insurance company which the scheme member has the opportunity to choose. This is an option for example for a member of a personal pension scheme. The annuity could be guaranteed for a certain term not exceeding 10 years.

Drawdown

This was referred to as ‘unsecured income’ until 5 April 2011 and was, until April 2011, with one minor and temporary exception only available before and until age 75.

From 6 April 2011 drawdown could continue beyond age 75 without having to secure income by that age. Benefits drawn down could be provided either directly from the member’s pension fund through income withdrawal or in the form of a short-term temporary annuity (ie up to five years duration).

Until 6 April 2011 where an annuity from a defined contribution scheme had not been secured by age 75 then the member’s fund would fall into an Alternatively Secured Pension (ASP). This was originally introduced from April 2006 and was a restricted form of income withdrawal, only available

More on Registered pension schemes: