RPSM03104560 - Technical Pages: Protecting pension rights from tax charges: Enhanced protection: Relevant benefit accrual: Post commencement earnings limit for non-capped members

The post commencement earnings limit for non-capped members

The ‘post commencement earnings limit’ for non-capped member is 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’,
• the individual leaving the pensionable employment to which the defined benefits or cash balance arrangement relates, and
• the individual’s death

as long as this amount is not more than 7.5% of the standard lifetime allowance at the ‘first relevant event’.

Where this amount is more than 7.5% of the standard lifetime allowance the ‘post commencement earnings limit’ for non-capped members is the greater of:

• 7.5% of the standard lifetime allowance at the ‘first relevant event’, and
• total earnings from the pensionable employment for the three year period ending with the earliest of the three dates shown above divided by three.

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.