Andrew has pension rights under four different
arrangements. The benefits relate to two separate
employments. On 5 April 2006 these are valued at
Arrangement 1 – defined benefits: £750,000
Arrangement 2 –
cash balance: £250,000
Arrangement 3 –
other money purchase: £50,000
Arrangement 4 – defined benefits: £300,000
Arrangements 1 to 3 relate to employer A. Arrangement 4 is in
respect of employer B.
Two years later Andrew decides to take benefits from
arrangement 1. The value of this
benefit crystallisation event is £900,000.
For the relevant benefit accrual test the crystallised value
of the benefits paid from arrangement 1 (£900,000) is compared
to the value of all benefits provided by cash balance and
defined benefits arrangements for employer A on 5
April 2006 (£1 million).
The amount of those rights on 5 April 2006 - £1 million
– is re-valued in line with the legislation to give the
‘appropriate limit’. The £900,000 crystallised is
less than the value of the protected defined benefits and cash
balance benefits for employer A so there is no relevant benefit
accrual.
Another two years later Andrew decides to take benefits from
arrangement 2. The crystallised value of these benefits is
£350,000. This means Andrew has now crystallised total
benefits for employer A worth £1.25 million. (Note that the
£900,000 taken two years earlier is not re-valued in line with
the increase in the
standard lifetime allowance.) The £1.25
million benefits taken is compared to the re-valued amount of the
protected defined benefits/cash balance benefits for employer A on
5 April 2006 – the appropriate limit.
The appropriate limit is found to be £1.22 million. As
the total benefit taken are more than the appropriate limit there
has been relevant benefit accrual and Andrew loses enhanced
protection.
| Glossary ( RPSM20000000) |
