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HMRC internal manual

Inheritance Tax Manual

From
HM Revenue & Customs
Updated
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Pensions: Scheme pensions and lifetime annuities: background

Scheme Pensions

Where a member has a defined benefit arrangement the only pension option available is a scheme pension. For members with money purchase arrangements their options include a scheme pension although they must first have had the opportunity to select a lifetime annuity. But, there is no obligation to buy an annuity. Scheme pensions may be paid by the scheme administrator or by an insurance company selected by the scheme administrator.

Lifetime annuities

Lifetime annuities must be paid by an insurance company, although scheme pensions may also be paid by insurance companies. Payments by a Registered Pension Scheme to or in respect of a person who is or has been a member are within the scope of the authorised payment rules (and unauthorised payment charges). Payments by an insurance company in respect of an annuity (or scheme pension) are not payments by a Registered Pension Scheme, so would be outside the scope of the authorised payment rules. But, such payments are specifically brought within the authorised payment rules. In particular the rules provide that:

  • where an investment (including an annuity) is acquired from the sums and assets in a Registered Pension Scheme,
  • payments under or in connection with that investment are treated as being made from the sums and assets of the pension scheme.