(This archived guidance relates to HMRC discretionary
practice before the 6th April 2006. For current guidance on
Registered Pension Schemes see the Registered Pension Schemes
Manual)
[17.30]
The maximum lump sum an ex-spouse could receive by
commutation of part of a pension payable from a pension credit
benefit in normal circumstances (i.e. not full commutation for
triviality or serious ill health) is an amount not exceeding 2.25
times the initial pension payable (see
PSI24.2.4). Also the pension
is normally payable between age 50 and 75 (see
PSI24.1.8).
Where the ex-spouse member is under age 50 where full
commutation takes place on either triviality or serious ill health
grounds, the initial pension payable for the purpose of calculating
and then deducting “the largest lump sum otherwise
payable” from the amount of the full commutation payment in
order to establish the section 599 tax liability can be calculated
as if the ex-spouse was age 50 at the time of the full commutation.
If the pension payable from the pension credit benefit would
have been secured by the purchase of an annuity, such as in the
case of an insured scheme, an appropriate age 50 annuity rate
should be used to determine the initial pension payable. For
example, if the ex-spouse is a 45 year old single male and the
pension that would have been payable in normal circumstances would
have been subject to LPI increases, the “appropriate age 50
annuity rate” should be an available market rate for a single
life 50 year old male with LPI increases at the time of the full
commutation.
Where an annuity would not normally be purchased, typically
where a large self-administered scheme is paying the benefit, the
scheme actuary can calculate the amount of pension that could have
been paid to the ex-spouse, had the ex-spouse been age 50 at the
time of the full commutation.
