RPSM03301060 - Scheme Administrator Pages: Protecting pension rights from tax charges: Valuing pension rights: Uncrystallised rights – hybrid arrangements

Valuing uncrystallised rights - hybrid arrangements

An individual's uncrystallised pension rights will be valued on the basis of whichever rights – see RPSM03301030 to RPSM03301050 – have the highest value.

For example, an individual may have rights in an arrangement to take benefits from their fund on a money purchase basis, or take benefits at say 1/100th of pensionable earnings for each year of service. The fund and the defined benefits right would both be valued as at 5 April 2006 and the higher value would apply for protection purposes.

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;

1. a retirement benefits scheme approved under Chapter 1 Part 14 Income and Corporation Taxes Act (ICTA) 1988
   
   
2. a scheme formerly approved under section 208 ICTA 1970
   
   
3. 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
   
   
4. a deferred annuity contract (a 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.