RPSM03302140 - Scheme Administrator Pages: Protecting pension rights from tax charges: Valuing lump sums: Scheme specific protection – rights more than HMRC limits

Valuing scheme specific lump sum rights: where rights of more than the maximum permitted lump sum or maximum permitted pension have been identified

Only one scheme for the employment

Where there are uncrystallised rights under only one scheme of the employer and

• the value of the uncrystallised lump sum right under a scheme is more than the maximum permitted lump sum (see RPSM03302060) and
• the amount of the uncrystallised rights is more than the maximum permitted pension (see RPSM03301070)

the calculation is simple. The maximum permitted lump sum becomes the value of the protected lump sum right and the maximum permitted pension becomes the value of the uncrystallised pension rights.

More than one scheme for the employment

Where uncrystallised rights are held under more than one scheme for the same pensionable employment, the amount of the excess over the maximum permitted amount is apportioned between each scheme. The amount of the uncrystallised rights under the scheme is reduced by the portion of the excess. This portion of the excess amount must be found using the formula

V/AV

Where V = the value of the uncrystallised lump sum (or pension) rights under the arrangement

AV = the total value of the uncrystallised lump sum (or pension) rights under all arrangements in respect of the employment being pensioned.

So the value of the uncrystallised right under the scheme will be

Scheme value – (excess amount x scheme value/total value)

RPSM03302150 gives an example where the uncrystallised lump sum rights are more than the maximum permitted lump sum.

RPSM03302160 gives an example where the uncrystallised rights are more than the maximum permitted pension.