| [Para 25(1) Sch 36] |
For the purposes of protection, the value of an
individual’s crystallised lump sum rights is 25% of the value
of the crystallised pension rights from ’relevant existing
pensions’ on 5 April 2006.
RPSM03101020 to
RPSM03101040 explains what relevant
existing pensions are and how they should be valued.
This value for crystallised lump sum rights is notional and
is not the value of the actual lump sum taken when the crystallised
pension rights came into payment.
Example
A pension in payment on 5 April 2006 of £5,000 per annum has a capital value of 25 times the annual rate of the pension in payment. This equates to £125,000 and 25% of this sum (£31,250) will be deemed to be the value of the lump sum taken.
In the example, the individual may have had a lump sum of more
or less than £31,250. The value of crystallised lump sum
rights will be £31,250 even where no lump sum benefit was
taken before 6 April 2006. This valuation method in the legislation
gives certainty and simplicity to the calculations without the need
for schemes to provide retired members with information on lump
sums previously paid.
The value of crystallised lump sum rights is relevant only
when testing whether or not total lump sum rights on 5 April 2006
exceeded £375,000.
| Glossary ( RPSM20000000) |
