The value of a member's crystallised pension rights is the total
of the values of all relevant existing pensions (see
RPSM03301005) in payment at 5 April
2006.
The value of each pension is 25 times the annual rate of the
relevant existing pension in payment at 5 April 2006. (See
RPSM03301020 for more guidance on
what the annual rate of a pension is where a benefit is being paid
as income withdrawals or as income/pension drawdown.)
This factor of 25 takes into account that a tax-free lump sum
was probably paid when the pension originally came into payment. So
no further figure needs to be included in respect of any tax-free
lump sum actually paid.
Where lump sum rights needs to be valued for lump sum
protection the value of the lump sum element of crystallised
benefits is deemed to be 25% of the value of the pension rights. It
does not matter what amount of lump sum was actually paid to the
member, or even if the member actually received a lump sum, the
legislation sets the amount as 25% of the value of the pension
rights
Example
Pension in payment at 5 April 2006 = £10,000 a year
Value of crystallised pension is 25 x £10,000 = £250,000
Deemed value of crystallised lump sum is £250,000 x 25% = £62,500
See also RPSM03302020 for more information on the valuation of crystallised lump sum rights.
| Glossary ( RPSM20000000) |
