RPSM03101020 - Technical Pages: Protecting pension rights from tax charges: Valuing pension rights at 5 April 2006: Crystallised rights

Crystallised rights

An individual’s pension rights that have already crystallised on 5 April 2006 must be taken into account in arriving at the figure for protection purposes. Crystallised pension rights are ’relevant existing pensions’ being paid to the individual.

Lump sums that have been taken before 6 April 2006 do not count towards the value of the crystallised pension rights.

If there is more than one relevant existing pension in payment, the crystallised pension rights are the aggregate of all such pensions.

The value of such a pension is 25 times the annual rate of the relevant existing pension in payment on 5 April 2006. It is not 25 times the amount of pension received in the 12 months before 5 April 2006. So if an individual’s pension is increased to a new annual rate on 1 April 2006 it is 25 times the annual rate effective from 1 April 2006. If the pension in payment on 5 April 2006 is a bridging pension that is paying a higher amount before reduction at state pension age the crystallised value is 25 times the rate of pension in payment on 5 April 2006, i.e. the higher, unreduced amount. The crystallised value is not 25 times the actuarial equivalent value of the bridging pension.

For pensions under income withdrawal/drawdown, the maximum annual pension permitted on 5 April 2006 should be multiplied by 25.

For example, an individual with aggregate relevant existing pensions of £10,000 would have those crystallised pension rights valued at £250,000 for the purposes of protection from the lifetime allowance charge.

Where a small self-administered pension scheme (SSAS) is paying a pension (not being a drawdown pension) directly to an individual under its annuity deferral provisions, the value of that pension is 25 times the annual pension in payment on 5 April 2006.