RPSM03103020 - Technical Pages: Protecting pre 6/4/06 pension rights from tax charges: Pension debits: Example
Pension debits as a result of a pension sharing order on divorce: example
Example
Kevin has notified protected pension rights of £3 million. His personal lifetime allowance is twice the standard lifetime allowance.
In June 2010, his protected pension rights are reduced by a pension debit of £300,000. His £3 million pension rights on 5 April 2006 are deemed to have reduced to £2.7 million because of the £300,000 pension debit. This causes a recalculation of his protected pension rights which reduces his personal lifetime allowance to 1.8 x the standard lifetime allowance.
Kevin crystallises his benefits in December 2015 when the standard lifetime allowance is £1.5 million. Kevin can crystallise benefits valued up to £3.24 million without being subject to the lifetime allowance charge. See RPSM03102020 for an explanation of how Kevin’s primary protection has been calculated.
In this example, the recalculation in paragraph 11, schedule 36 Finance Act 2004 was required because the pension sharing order was made against the individual’s rights which were held in relevant pension arrangements, see RPSM03101060.
| Glossary (RPSM20000000) |
