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| [Para 8 Sch 36 & s212] |
Paragraph 8 of Schedule 36 to Finance Act 2004 explains how
uncrystallised pension rights must be valued at 5 April 2006. Such
rights are the aggregate value of the individual’s pension
rights on 5 April 2006 under each “relevant pension
arrangement”.
A value must be found for uncrystallised rights on 5 April
2006 even though the benefits may not come into payment until years
later. To achieve this, paragraph 8 adopts the valuation system
used in section 212 Finance Act 2004.
Section 212 of the Finance Act 2004 states how
uncrystallised rights should be valued for the purposes of
surchargeable unauthorised member payments. Rights are valued in
different ways dependent upon the type of arrangement under which
the rights are held.
Section 212 deals separately with rights under
For the purposes of paragraph 8 Schedule 36 FA 2004 the value of
uncrystallised rights in an arrangement or arrangements under a
retirement benefits scheme (except for schemes within s611A(1)(a)
ICTA 1988) or a deferred annuity contract will be the value of
those rights subject to the amount of the pension not exceeding the
HMRC limit applying to those pension rights under the scheme or
contract.
Where the individual has uncrystallised pension rights in
more than one pension scheme relating to the same employment the
rights should be valued separately under each scheme ignoring the
value of rights held under other schemes in respect of the same
employment.
[Article 28 The Taxation of Pension Schemes (Transitional
Provisions) Order2006 – SI 2006/572]
If an individual became entitled to payment of their lump
sum before 6 April 2006 but deferred the entitlement to their
pension, and the pension deferral took place after 26 July 2004,
the lump sum is deemed to crystallise on 6 April 2006 – see
RPSM09104542. In these circumstances
the lump sum is treated as an uncrystallised right as at 5 April
2006 and should be included in the valuation of uncrystallised
pension rights.
To value this right under paragraph 8 Schedule 36 FA 2004
the lump sum is treated as being payable as a separate lump sum
from a defined benefits arrangement. The value of the lump sum will
be the amount of the lump sum to which the member became entitled
before 6 April 2006.
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| Glossary ( RPSM20000000) |
