Section 28 of the Pension Schemes Act 1993 gives holders of personal pensions the right to an interim arrangement in respect of protected rights when their pensions mature.
Interim arrangements for non-protected rights are permitted by section 58 of and Schedule 11 to the Finance Act 1995. Under an interim arrangement, instead of immediately using the accumulated fund to buy an annuity, the pension holder may withdraw an income from the fund, within specified maximum and minimum limits, and defer the purchase of an annuity. When the member reaches the age of 75, the remainder of the fund must be used to buy an annuity. However, unless the fund is sufficiently large (at least £100,000-£200,000) an interim arrangement could deplete the fund to a point where there was insufficient remaining to buy an annuity that would provide a reasonable level of income from age 75 onwards.
There is a power (section 145 of the Pensions Act 1995) to extend the availability of interim arrangements to cover protected rights in occupational schemes, but at present such an extension would create a requirement on schemes to offer such arrangements. For this reason the power to extend the availability of interim arrangements in this way has not been used.
This paragraph amends section 28 of the Pension Schemes Act 1993 to allow the providers to decide whether or not to supply interim arrangements. It is intended that the power to extend the availability of interim arrangements to protected rights in occupational schemes will then be used.