RPSM03104550 - Technical Pages: Protecting pension rights from tax charges: Enhanced protection: Relevant benefit accrual: The post commencement earnings limit for capped members

The post commencement earnings limit for capped members

The ‘post commencement earnings limit’ for capped members is the lower of:

• 7.5% of the standard lifetime allowance when the ‘first relevant event’ occurs, and
• the individual’s highest earnings from the employment being pensioned in any consecutive 12 months in the three year period ending with the earliest of:

The first relevant event is the earlier of the first benefit crystallisation event or the first permitted transfer to an other money purchase arrangement.

Where the individual died or left pensionable employment before the ‘first relevant event’ the amount of earnings can be increased from the date of death or leaving the pensionable employment (as appropriate) until the date of the ‘first relevant event’. The increase is the greater of:

• an annualised increase of 5%, or
• for contracted-out rights, right subject to revaluation, or preserved rights an annualised increase at the percentage rate in regulation 3 of The Registered Pension Schemes (Uprating Percentages for Defined Benefits Arrangements and Enhanced Protection) Regulations 2006 – SI 2006/130, or
• the percentage increase in the Retail Price Index.