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The concept of the scheme pension has long existed under defined benefit pension schemes where the trustees pay out their pension promise from the assets of the scheme. It has been adapted post A Day to offer a meaningful alternative to the unsecured pension (USP) or alternatively secured pension (ASP) for members of individual trust based schemes, through either a small self administered scheme (SSAS) or (more recently) a family SIPP (AN INDIVIDUAL TRUST BASED self invested personal pension).

A scheme pension allows you to draw an income from a pension fund as determined by an actuary appointed to the scheme. The pension scheme's trustees retain ownership of the funds which continue to be invested by you. A scheme pension is an alternative to an annuity or an income drawdown (either capped or flexible).

The main features of scheme pensions are:

• You can take a 25% tax free lump sum from age 55 (if you haven't already invested your pension).
• Income MAY be higher than an annuity.
• Maximum income levels MAY BE approximately equivalent to maximum income under capped drawdown.
• The pension is individually calculated with no mortality cross subsidy, AS WOULD APPLY UNDER AN ANNUITY.
• The income is based on YOUR fund size, age, gender and life expectancy, and the likely yield of the investments, BETWEEN MINIMUM AND MAXIMUM AMOUNTS.
• Your health is an important consideration as the actuary can take underwriting into account and you can be underwritten at different times to reflect your current state of health. This can have the impact of increasing income or reallocating excess funds.
• You can take an income that suits your investment risk as determined by your scheme actuary, but the income you withdraw cannot be varied and has to be paid at least annually.
• The income can be reviewed annually but it is generally prudent for the actuary to do so every three years.
• The actuary may decide that your fund has excess benefits in which case you could build up a cushion, increase income levels or reallocate the fund to someone in your scheme who is not yet 75.
• The actuary may decide that your income from time to time needs to go down IF THE REQUIRED YIELD ON INVESTMENTS IS NOT MET.
• You can transfer any number of pension plans (personal and occupational) to one single scheme.
• Choice of death benefits for dependents, IN THE FORM OF A LUMP SUM ON DEATH PRIOR TO AGE 75 AND AS AN INCOME POST 75.
• You have the option of buying a ten year fixed payment period with your pension TO ENSURE THAT IT IS PAID FOR AT LEAST TEN YEARS IN THE EVENT OF PREMATURE DEATH.
• Your Spouse can receive 100% of your fund on your death as a pension fund in their own right TO CONTINUE TO DRAW AN INCOME.