Phoenix Group announced the new scheme, which comes under the existing ‘small pot’ legislation, on Wednesday.
It is available to a group of Phoenix Life customers aged between 55 and 85 with an annuity in payment not exceeding £300 ($399, €336) a year.
This is provided that the calculated value does not exceed £2,000 and it commenced before the pension freedoms were introduced in April 2015.
Rare opportunity
Danny Dowd, head of retirement propositions for Phoenix, said the scheme offers customers a choice they have likely not had before.
“Offering customers the option of taking a one-off lump sum is a win-win situation. It offers customers a greater degree of control, but also enables us to free up resources that go into administrating small annuities,” Dowd said.
Phoenix will start offering the option to a group of eligible customers from November 2017.
Calculating the sum
The amount Phoenix is offering will reflect all the potential future benefits that might be expected under the policy.
Phoenix will calculate the expected amount by working out the amount and timing of each pension payment allowing for any annual increases and the likelihood of it being paid.
Where the policy also pays a pension to a surviving spouse or dependant after the death of the policyholder Phoenix will also take these payments into account. Phoenix then reduce the value of future payments to allow for interest it could have earned.
The net payment is the expected amount after taking off tax due to HM Revenue & Customs.
Phoenix Group is the UK’s largest specialist consolidator of closed life funds, the group has been involved in numerous mergers and acquisitions over its 12 year history.
