What is Scheme Pension?

This has existed as an option for many years, however has only recently been made available for individuals in this market. Its strength is that the income that can be taken is based on the individual’s own circumstances rather than external factors such as GAD rates or equivalent annuity income figures. An actuary calculates the income based on a client’s age, mortality expectation, fund size and performance, potentially allowing a far greater income than that which would be available under an annuity or Alternatively Secured Pension (ASP).

The difference in income comes down to the fact that an ASP contract is designed to prevent people’s funds from running out whereas a Scheme Pension can be set up to ensure the fund is as close to zero as possible at date of death.

If your health deteriorates whilst in Scheme Pension, the actuary can recalculate the income to take into account the new life expectancy. The new level of income can then be used and will assist in the way of reducing any potential Inheritance Tax liability.

The levied tax charge of up to 82% under ASP also applies to Scheme Pension, although because Scheme Pension is designed to have as close a fund value to zero at date of death as possible, the liability should be a lot less than under ASP.

The Scheme Pension can include a guarantee period of up to 10 years. This doesn’t guarantee the value of the income but that a spouse or dependant would continue to be paid an income on your death within the period.

This is an extremely complex area of retirement planning and should be discussed in a face-to-face meeting.

To arrange a meeting or to discuss your options further, call us now on our FREE helpline 0808 1787 335.