United Kingdom Atomic Energy Authority Pensions - The State Scheme Spreading Option for AVCs

The State Scheme Spreading Option for AVCs

If you are a member of an occupational pension scheme and wish to retire before your State Pension Age (SPA - currently 60 for women and 65 for men), you may be eligible for the State Scheme Spreading Option (SSSO). This option provides you with a temporary pension until you reach your SPA.

How does SSSO work?

The SSSO allows you to use part or all of your AVC funds to buy a level temporary pension equal to either:

the value of the married couple’s, or single person’s basic State pension (depending on your circumstance at the time you retire), or
such lesser amount as your AVC fund can secure

Currently the single person’s basic State pension is £82.05 per week (2005/2006) - £4,266.60 a year. Therefore, if you are single at retirement and if the size of your AVC fund allows, you can purchase a temporary pension of £4,266.60. This would be payable from your early retirement date and would cease when you reach your SPA. The rate of the temporary pension would remain unchanged whilst in payment.

If you are married when you retire you may, depending on the size of your AVC fund, be able to purchase a SSSO pension of £6,822.40 a year. This is based on the married person’s basic State pension of £131.20 a week (2005/2006) - £6,822.40 a year. You may only purchase this level of annuity, however, if your spouse has not already exercised a similar option under their own occupational pension arrangement. The combined total annuity payable to your spouse and yourself may not exceed the sum of the single and married person’s basic State pension.

If you are able to purchase more than £4,266.60 (or £6,822.40 if eligible) a year, then the excess funds must normally be used to buy additional pension benefits which will be payable for the rest of your life.

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 occupational pension or to State pension benefits) remains the same. This is illustrated in the graphs below:

Pension with SSSO barchart

The illustration in the graph is based on the maximum temporary pension which may be bought by your AVC fund.

Pension without SSSO barchart

* Based on a single male retiring early at the age of 60

The illustration in the graph is based on the maximum temporary pension that a single person can buy with their AVC fund.

The graphs illustrate that if you do not select the SSSO option in the years before your SPA your income will be at a lower level for this period.

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, which are normally payable throughout your lifetime.

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