If you are a member of an occupational pension scheme and wish to retire before your State Pension Age you may be eligible for the State Scheme Spreading Option (SSSO) which is an annuity available from Prudential. This option (provided by the Prudential and not the UK Atomic Energy Authority) provides you with a temporary pension until you reach your SPA.
The SSSO allows you to use part or all of your fund under the UK Atomic Energy Authority AVC scheme to buy a temporary pension equal to 125% of the value of the single person’s basic state pension, or such lesser amount as your AVC fund will secure. Currently, the single person’s basic state pension is £115.95 per week (2015/2016) or £6,029.40 per year.
Your fund will remain invested until you choose to make the purchase. However, during the period of deferment, you may opt to switch your AVC fund from one type of investment fund to another available under the scheme with Prudential.
If your fund is invested in the With Profits Fund and you decide to purchase an annuity other than at your normal retirement date, the amount payable may be reduced to reflect the value of the underlying assets at that time. This is known as a Market Value Reduction (MVR).
Payments to you under the annuity will start from the date of purchasing the annuity and would not be backdated to the date of your retirement. This means that the amount of the annuity you will receive will be determined by the rates available at the date of purchase. If you select a guaranteed period, the guarantee will begin from the annuity start date.
When you are ready to make an annuity purchase, you must contact the pensions administration office in Thurso. It will be your responsibility to make contact to arrange the purchase.
You would need to ensure that the pensions administration office in Thurso are notified of any changes with regard to potential beneficiaries of your AVC fund, so that they have up-to-date information in the event of your death prior to the annuity being purchased.
You are encouraged to consult a financial adviser before deciding whether or not to make an immediate purchase of an annuity.
Neither the UK Atomic Energy Authority Pension Scheme, nor any of the employers participating in the UK Atomic Energy Authority Pension Scheme, nor Prudential are able to offer you any advice on the timing of the annuity purchase or on the possible benefits and risks of deferral.
If you decide to defer the purchase of the annuity, you should complete the deferred annuity purchase option form.
State Scheme Spreading Option for AVCs
If you are a member of a registered pension scheme and wish to retire before your state pension age (SPA), you may be eligible for the State Scheme Spreading Option (SSSO). This option provides you with a temporary pension until you reach your SPA (subject to scheme rules).
How does SSSO work?
The SSSO allows you to use part or all of your AVC funds to buy a temporary pension equal to:
125% of the value of a single person’s basic state pension, or such lesser amount as your AVC fund can secure.
Currently the single person’s basic state pension is £115.95 per week (2015/2016) or £6,029.40 per year. Therefore at retirement, and if the size of your AVC fund allows, you can purchase a temporary pension of £7,536.75 per year. This would be payable from your retirement date and would cease when you reach your SPA (subject to scheme rules). The rate of the temporary pension would remain unchanged whilst in payment.
If you are able to purchase more than £7,536.75 per year, then the excess funds must usually be used to buy additional pension benefits which will be payable for the rest of your life, from your retirement date onwards.
The purpose of the SSSO is to help keep your income relatively level in value throughout your retirement, and comes into payment as soon as you retire.
What happens when I reach my SPA?
When you reach SPA, the Department of Work and Pensions will pay you the appropriate basic state pension and the SSSO pension will stop.* Therefore in practice, your income at SPA (ignoring any increases in the intervening period to either your main scheme pension benefit or to state pension benefits) remains the same.
* Please note that the SSSO pension may stop before your SPA depending on scheme rules.
Am I eligible for an SSSO option?
The SSSO is normally available to AVC contributors who have sufficient funds in their AVC account to pay for the temporary pension.
What if I decide not to choose the SSSO?
If you decide not to choose the SSSO, or use only part of your AVC fund to purchase the SSSO, you can select the usual range of pensions that are normally payable throughout your lifetime or you can receive your fund as a cash payment which will be subject to taxation at the rates applicable at the time you take the benefit.
The SSSO is normally available to AVC contributors who:-
If you decide not to choose the SSSO, or use only part of your AVC fund to purchase the SSSO, you can select the usual range of pensions, which are normally payable throughout your lifetime.
If you require further information contact the scheme administrators who will get a quote from Prudential.
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