RPSM03302005 - Scheme Administrator Pages: Protecting pension rights from tax charges: Valuing lump sums:

The different types of lump sum protection and valuation

There are three different types of lump sum protection. These are

• Where total lump sums are more than £375,000 and the individual has primary protection
• Where total lump sums are more than £375,000 and the individual has enhanced protection
• Where the individual either has

and in both instances the value of the uncrystallised lump sum rights in an occupational pension scheme is more than 25% of the total uncrystallised rights. (This is scheme specific lump sum protection.)

The valuation process for each type of lump sum protection is generally the same. The only difference is where a lump sum entitlement of more than the maximum permitted lump sum (see RPSM03302060) has been identified and the form of protection is scheme specific lump sum protection. In this case there is an extra step in calculating the value of the uncrystallised lump sum right under the scheme. In addition to see whether or not an individual qualifies for scheme specific lump sum protection the value of the uncrystallised rights under the scheme must be identified.