RPSM03301050 - Scheme Administrator
Pages: Protecting pension rights from tax charges: Valuing pension
rights: Uncrystallised rights – cash balance
Valuing uncrystallised rights - cash balance arrangements
The value of the pension rights is the amount that would be
available for the provision of benefit, had the benefit come into
payment on 5 April 2006.
The valuation should be carried out using two valuation
assumptions
- the individual has reached age 60unless a
different age was set out in the terms of the arrangement as they
stood on 10 December 2003 as the age at which no reduction would
apply to the payment of an immediate benefit, in which case the
individual should be assumed to be that age. Where the individual
has already reached 60 or the age specified under the arrangement
on 10 December 2003, the individual’s actual age on 5 April
2006 should be used when valuing the pension rights, and
- the individual is deemed to be in good
physical and mental health on 5 April 2006.
Where on 5 April 2006 the individual has reached an age where
under the scheme rules there is no reduction for early payment the
individual’s actual age on 5 April 2006 should be used when
valuing the pension rights.
Where the
arrangement is in an occupational pension scheme a
further calculation must be done to ensure that the individual is
not given protection for benefits above HMRC limits – see
RPSM03301070.
The types of pension scheme where this further calculation
for HMRC limits needs to be made are;
- a retirement benefits scheme approved under Chapter 1 Part 14
Income and Corporation Taxes Act (ICTA) 1988
- a scheme formerly approved under section 208 ICTA 1970
- a relevant statutory scheme (as defined in section 611A ICTA
1988) or a scheme treated by HMRC as if it were a relevant
statutory scheme, and
- a deferred annuity contract (section 32 policy) entered into in
relation to (a) to (c) above inclusive.
If the calculation for HMRC limits gives a lower value it is the
lower amount that is protected.
