PTM072340 - Death benefits: types of pension: dependants' drawdown pension: dependants’ short-term annuities (up to 5 April 2015)
As of 6 April 2024 there is no longer lifetime allowance. If you are looking for information about protections, enhancement factors and the lifetime allowance charge please see these pages on The National Archives.
If you are looking for information about the principles of lifetime allowance and benefit crystallisation events please see these pages of The National Archives.
Glossary |
Paying a dependants’ short-term annuity
Taking a dependants’ short-term annuity and income withdrawal from the same pension scheme/arrangement at the same time
The maximum dependants’ short-term annuity payable
Reviewing a dependants’ short-term annuity
What happens at age 75?
Note: The guidance on this page relates to short-term annuities taken out before 6 April 2015. See page PTM072420 for guidance on short-term annuities taken out on or after 6 April 2015 and for taxation details.
Paying a dependants’ short-term annuity
Paragraph 20 Schedule 28 Finance Act 2004
The Registered Pension Schemes (Transfers of Sums and Assets) Regulations 2006 - SI 2006/499
Part of a dependants’ drawdown pension fund can be used to buy a dependants’ short-term annuity contract from an insurance company of the dependant’s choice. A dependants’ short-term annuity contract will pay a fixed amount each year. The contract can last for up to five years and does not have to come to an end when the dependant reaches age 75.
Taking a dependants’ short-term annuity and income withdrawal from the same pension scheme/arrangement at the same time
A dependants’ short term annuity and income withdrawal can be taken from the same scheme/arrangement as long as the scheme rules allow it.
The maximum dependants’ short-term annuity payable
There is no minimum amount. If a dependants’ short-term annuity is purchased from a dependants’ drawdown pension fund to which flexible drawdown applies, there is no upper limit on the amount the dependants’ short-term annuity can pay.
Where a dependants’ short term annuity is bought using funds from a dependants’ capped drawdown pension fund there is an upper limit on the amount the short-term annuity can pay. The amount payable from a dependants’ short-term annuity contract plus the amount of any income withdrawal from the dependants’ capped drawdown pension fund in a pension year cannot be more than the maximum dependants’ drawdown pension.
Reviewing a dependants’ short-term annuity
A dependants’ short-term annuity can be for a period of up to five years. However if the dependant is using dependants’ capped drawdown, the maximum drawdown pension will be reviewed:
- at least every three years if they are under 75, and
- every year when they are 75 or older.
What happens at age 75?
The dependants’ short-term annuity can continue past the 75th birthday. The dependant can also buy a dependants’ short-term annuity when they are 75 or older.