2Determining amount of member's lifetime annuity
(1) The annual amount of a member's lifetime annuity shall be determined in accordance with any of paragraphs (2) to (4).
(2) The manner of determination prescribed by this paragraph is variation from year to year—
(a) where the variation is in line with, or by a percentage which does not exceed, the percentage by which the amount would vary if it varied in line with, changes in—
(i) the retail prices index,
(ii) the market value of any freely marketable assets,
(iii) an index reflecting the value of freely marketable assets,
after allowing for any contractual charges;
(b) in accordance with an insurance company's published “Principles and Practices of Financial Management” in relation to with-profits business, as required under section 6.10 of the Financial Services Authority's Conduct of Business Sourcebook as it stood immediately before the coming into force of these Regulations; or
(c) any combination of those factors.
(3) The manner of determination prescribed by this paragraph is variation—
(a) in line with, or by a percentage which does not exceed the percentage by which the amount would vary if it varied in line with, changes in any of the factors specified in paragraph (2) (or any combination of those factors); and
(b) by reference to an assumed annual level of growth of between 0% and 5%, selected by the member, in the relevant factor or factors.
(4) The manner of determination prescribed by this paragraph is determination in accordance with the following conditions.
The amount of the annuity payable is linked to any of the factors specified in sub-paragraphs (a) to (d) of paragraph (2) (or any combination of those factors).
A review is conducted, by the insurance company by whom the annuity is provided, at least once every 5 years of the value of the sums and assets which are applied towards the provision of the annuity.
At the time of the review, the maximum and minimum amount of income that may be drawn in each year until the next review is determined.
The maximum amount of income which the annuitant may draw is 120% of the annual rate of a level annuity which could be purchased with the sums and assets which are applied to its provision for the member, for the term for which the annuity is provided.
The minimum amount of income which the annuitant may draw is half of the annual rate of a level annuity which could be paid upon the assumptions in the preceding paragraph of this condition.
(5) For the purposes of paragraph (4), the annual rate of an annuity which could be purchased with the sums and assets applied to its provision shall be assumed to be—
(a) the freely marketable level annuity rate (if any) applicable in the case of the insurance company in question which could be purchased with those sums and assets; or
(b) if the insurance company in question does not offer level annuities, the average of three current market annuity rates for a level annuity.
(6) For the purposes of paragraph (2)—
“freely marketable assets” means assets which are sold on the open market at a price not determined by the member;
“the retail prices index” has the meaning given in section 279(1).
Specified date: 6 April 2006: see reg 1(1).