Tax simplification introduced a new option whereby an individual may choose to secure part (or all) of their unsecured pension through the purchase of a short-term annuity contract from an insurance company.
The term of that annuity contract cannot be more than five years, and the annual amount payable by the contract is bound by the same rules as income withdrawal payments paid direct from the scheme. The term of that annuity must not extend beyond the member’s 75th birthday.
The short-term annuity contract option gives people the opportunity to reassess their pension needs periodically and to choose alternative types of annuities, so long as they secure an income for life by age 75.