Unsecured Pension (USP)
Unsecured Pensions are a popular
alternative to buying a lifetime annuity. They allow you to draw an income from
your pension fund while the fund remains invested. The maximum level of income
you can draw is about 120% of the level lifetime annuity payable to a single
person of your age and sex; and the minimum income you can draw is zero. You
can use your remaining fund to buy a lifetime annuity at any time.
Anyone in a personal or stakeholder pension
scheme can use a USP. However, some pension schemes will not operate USPs for
small funds. If you are in an occupational money purchase scheme you may be
able to use a USP, if the scheme rules allow it. If you are in an employer’s
scheme that doesn’t offer a USP and you want to use it, you must first transfer
your pension rights from that scheme into a personal pension scheme. In this
case you may find that you could lose any protected entitlement to a tax free
cash sum greater than 25% of the fund value.
Please see below for more information: