Members of occupational pension money purchase schemes are not allowed to buy with-profits annuities...
Members of occupational pension money purchase schemes are not allowed to buy with-profits annuities unless the trustees have made specific provisions for them to do so.
The Inland Revenue has a requirement that the rules of the scheme must contain a provision that allows the retiring member to choose whether or not to take an investment-linked contract or one that cannot be reduced below its initial annual rate.
With six life offices now offering with-profits annuities and more looking at the developing market occupational pension members may not be eligible.
Gillian Cook, at Bacon & Woodrow, said: "Because of Inland Revenue's rules with-profits annuities really only apply to personal pensions. They do not work well with occupational schemes." Members can transfer to personal pensions and then purchase a with-profits annuity to get around the difficulties or scheme trustees can relax the rules for specific members that wish to have the choice.
However, few schemes will consider this option because the risk involved in investment-linked annuities could put trustees in the position of being held liable if the member's income drops below its initial rate.
Ian Naismith, pensions development director at Scottish Widows, said: "We do take money direct from occupational schemes but the bulk is personal pensions.
"It is the responsibility of the trustees to ensure that their members are able to purchase a with-profits annuity.
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