Benefit details

This section asks for two types of information:

- General information about the scheme structure and the benefits allowed under the scheme rules

- Information about the number of members receiving different types of pension from the scheme

Where you have pensioners receiving benefits from the scheme, please indicate the number of pensioner members and dependants receiving benefits from the scheme as at the latest scheme year end date for which you have provided scheme membership numbers.

For the purpose of this section, where a member is receiving benefits on more than one basis (for example, phased drawdown where they receive both a drawdown pension and lifetime annuities in the name of the trustees), please count them multiple times. This information is not used for levy purposes.

Purchase of a lifetime annuity in the name of the trustees (rather than in the name of the members)

Select ‘Yes’ if the scheme rules allow for annuities to be bought in the name of the trustees. If the scheme rules permit this, indicate the total number of members (including dependants), if any, receiving benefits on this basis, whether they have drawn their benefits in full or under phased retirement. Phased retirement is where a member uses their pension pot in stages to provide an income – periodically using part of their pension pot to draw a tax-free lump sum and buy a lifetime annuity, leaving the rest of their pot invested. Exclude any members or dependants where the annuity has been bought in the name of the individual rather than in the name of the trustees as in this case the money has been paid out of the scheme to an insurer to provide the annuity and the individual is no longer a member.

Payment of a scheme pension directly from the fund

Select ’Yes’ where the scheme rules permit payment of a scheme pension directly from the fund (this is known as self-annuitisation). The member’s pot is converted to pension income in accordance with a process which is set out in the scheme rules. Self-annuitisation means that the scheme itself has promised to pay a member a pension income for the rest of their life and this is funded directly from the scheme assets and NOT secured via either :

an annuity or an insurance policy or
capped or fixed drawdown pension.

HMRC define a ‘scheme pension’ as ‘a pension entitlement provided to a member of a registered pension scheme, the entitlement to which is an absolute entitlement to a lifetime pension under the scheme that cannot be reduced year on year (except in narrowly defined circumstances) and meets the conditions laid down in paragraph 2 of Schedule 28 to Finance Act 2004.’ (RPSM20000000).

Drawdown pension directly from the scheme

This is where a member draws an income from the scheme while leaving the funds invested. It is also known as income drawdown. Only include members who are taking their drawdown pension directly from the scheme itself. Do not include members who transfer their pot to another scheme, for example a self-invested personal pension (SIPP), and take drawdown from that scheme.

There are two types of drawdown pension: ‘capped drawdown’ (only for members who took this out before April 2015) and ‘flexi-access drawdown’. Under capped drawdown, there are limits on the income the member can take, whereas under flexi-access drawdown, there are no limits. Under a drawdown pension, a part of the fund may also be used to purchase a fixed term annuity whilst leaving the rest of the fund invested. Include members who are taking drawdown directly from the scheme on any of these bases. Drawdown pension members who have currently elected to draw nil income should still be counted as receiving a drawdown pension.

Taking an income from the scheme on any other basis (please specify)

The number of members receiving a type of retirement income from the scheme which is not covered by the above categories. Please give brief details of what type of income or product this is.

This should include where you have paid an uncrystallised funds pension lump sum (UFPLS) to members or dependants in the scheme year on which you are reporting.

The ability to take an UFPLS was introduced in the Taxation of Pensions Act 2014 and is a lump sum taken from funds that have not yet been used to provide other retirement benefits, such as scheme pension or drawdown.

Effective date

This should be the latest scheme year end date for which you have provided scheme membership numbers.

Contracted out benefits on a defined benefit basis

GMP or section 9 (2B) rights. A scheme where the main part of the scheme is defined contribution but the scheme has contracted out on a defined benefit basis and has promised to provide a guaranteed minimum pension (benefits accrued before 6 April 1997) or section 9 (2B) rights (benefits accrued after 5 April 1997). This forms part of the members’ overall benefit rather than a minimum amount. This option will result in the payment of both benefits to a member.

This question relates only to contracting out on a defined benefit basis. Contracting out on a defined contribution basis ceased with effect from April 2012. Please see the DWP website for more information.

If you are not sure whether these benefits apply to this scheme, you should refer to scheme documents such as the trust deed and rules, member booklets and announcements, information provided to members on transfer out of the scheme, or annual benefit statements. You could also discuss with your scheme advisers.

A defined benefit underpin

The scheme pays the greater of their DB benefit or the annuity/pension which could be provided by their DC ‘pot’. The underpin could be on a contracted out (GMP or Section 9(2B) rights) or contracted in basis. Additional funding may be needed if the DB benefit is greater. This option will result in the payment of one benefit on an 'either/or; basis'.

Select yes even if the scheme no longer offers the particular benefit to active members but there are still members who have any of these types of benefits within the scheme which they built up in the past. Select yes even where the DC benefits currently exceed the underpin and the DB benefit is not triggered.

A guaranteed pot which is made available at retirement for the provision of retirement benefits

The ‘pot’ could be calculated by reference to final or average salary (eg 3/80 of final salary for each year of service) with a guarantee that the sum available will not fall, and may benefit from a guaranteed rate of interest. This may be called a cash balance scheme.

Select yes even if the scheme no longer offers the particular benefit to active members but there are still members who have any of these types of benefits within the scheme which they built up in the past. This question is designed to identify where guarantees are being provided by the scheme itself. The type of fund invested in (for example with-profits) is not relevant.