Can you sell or otherwise assign a guaranteed income stream?

[Dave Vanian]

I know someone who has a Defence Forces pension in addition to his current PAYE income. Obviously the pension is State guaranteed and will continue for his lifetime, with indexation.

He's looking to raise a lump sum using only the DF pension as security. Can he assign it to a third party in return for a lump sum? Normal bank borrowing is not an option in this particular case.

 

[rmelly]

My first thought would be what happens if he dies a year into drawing down the pension - would the value of his estate be enough to repay the outstanding lump sum?

 

[Dave Vanian]

The individual is in his 40s and in good health so life assurance cover could be arranged.