Annuity protection lump sum death benefit meaning

A-day 'A-day' is the widely used term for the broad pension tax 'simplification' reforms that began on 6 April 2006. The changes covered: how much pension contribution was allowed, the kinds of schemes an individual could invest in, the sums that could be taken (and when), and the choices available for any remaining fund. A-day also introduced the annual allowance and the (now abolished) lifetime allowance. See: Annual allowance and Lifetime allowance. AFPS AFPS: Armed forces pension scheme; see Practice Note: Public sector pensions and family proceedings. Accrual rate The speed at which pension benefits build as pensionable service is completed in a final salary scheme, eg 1/60 for each year of pensionable service. Accrued benefits The benefits earned in respect of service up to a specified date. Added years Extra pension provided by adding further years of pensionable service in a salary-related scheme. Such additional years are secured via transfer payments or through additional voluntary contributions/augmentation...

FORTHCOMING CHANGE: Under the Finance Bill 2025–26, unused pension pots and death benefits will also be treated as part of a deceased member’s estate, bringing them into the inheritance tax (IHT) net from 6 April 2027. These rules will not cover death-in-service payouts to active employees in relevant employment, nor a dependant’s scheme pension (that is, a DB scheme spouse’s or dependant’s pension). Existing exemptions, including those for spouses and civil partners, will continue to apply unchanged. Responsibility for settling any IHT will rest chiefly with the personal representatives in the first instance. For more detail, consult Practice Note: Inheritance tax and pensions; News Analyses: HMRC—Reforming inheritance tax—unused pension funds and death benefits; HMRC confirms new IHT rules on unused pension funds to apply from 6 April 2027; and HMRC policy paper: Inheritance Tax: unused pension funds and death benefits (November 2025). THIS PRACTICE NOTE RELATES ONLY TO REGISTERED MONEY PURCHASE OCCUPATIONAL PENSION SCHEMES Most pension arrangements generally offer benefits payable on a...

Prior to 6 April 2015, individuals entitled to money purchase benefits (also referred to as defined contribution (DC) benefits) faced a narrow set of retirement choices: receiving a scheme pension drawdown purchasing a lifetime annuity Buying a lifetime annuity was the route most frequently taken, chiefly because the other two options were only accessible: if the member’s scheme allowed them (which was uncommon in practice) for drawdown, if the member met certain conditions On 6 April 2015, pension freedoms were introduced to broaden the retirement pathways open to DC members and those with other ‘flexible benefits’ (e.g. cash balance benefits). Drawdown not only became far more widely available, but members with flexible benefits could also take their pension pot as one or more lump sums, called ‘uncrystallised pension fund lump sums’. For more detail, see Practice Notes: Pension freedoms—an introduction [Archived] and Uncrystallised funds pension lump sums (UFPLSs). This Practice Note examines annuities, the...