RPSM03105630 - Technical Pages: Protecting pension rights from tax charges: Lump sums: Scheme specific protection: Partial Transfer
How to pay protected lump sum benefits exceeding 25% where there has been a partial transfer out of rights after 5 April 2006
[Para 34 Sch 36] [Articles 21 - 23 The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572]
Where an individual makes a partial transfer out of a protected pension scheme the amount of protected pension commencement lump sum is reduced.
Up to 6 April 2012, the formula for the maximum pension commencement lump sum is
[VULSR x (CSLA/FSLA)] + ALSA - TV/4
VULSR = the value of the individual’s uncrystallised lump sum rights under the scheme on 5 April 2006)
CSLA = the standard lifetime allowance when benefit entitlement arises
FSLA = £1.5 million.
ALSA = the additional lump sum amount in respect of the increase in the value of benefits after 5 April 2006 (see RPSM03105580)
TV = the value of the sums and assets transferred out of the scheme after 5 April 2006.
In practice this means that ¼ of the transfer value is deducted from the usual amount of the protected lump sum (see RPSM03105580 to RPSM03105620).
RPSM03105635 gives an example.
From 2012, the formula for the maximum pension commencement lump sum is
[VULSR x (ULA/FSLA)] + ALSA - TV/4
VULSR = the value of the individual’s uncrystallised lump sum rights under the scheme on 5 April 2006)
ULA = the greater of £1.8 million or the standard lifetime allowance when benefit entitlement arises
FSLA = £1.5 million.
ALSA = the additional lump sum amount in respect of the increase in the value of benefits after 5 April 2006 (see RPSM03105580)
TV = the value of the sums and assets transferred out of the scheme after 5 April 2006.
In practice this means that ¼ of the transfer value is deducted from the usual amount of the protected lump sum (see RPSM03105580 to RPSM03105620).
RPSM03105635 gives an example.
Where an individual's right under a protected pension scheme are reduced due to the transfer out of a pension debit the individual's protected lump sum rights remain unchanged.
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