RPSM03303040 - Scheme Administrator Pages: Protecting pension rights from tax charges: Benefit payments - enhanced protection: Benefits above lifetime allowance

What if the value of the member's current benefit crystallisation event plus previous benefit crystallisation events and pre-commencement pensions is greater than the standard lifetime allowance?

Enhanced protection applies when the standard lifetime allowance is exceeded on a particular benefit crystallisation event.

This will happen if the standard lifetime allowance for the tax year of that event is less than the total of the following amounts

• the value of the member's pension rights being put into payment on this current benefit crystallisation event,
• the value of any previous benefit crystallisation event (to obtain its current value, the value of pension rights must be increased in line with the increase in the standard lifetime allowance from its value when the benefits were first taken), and
• the value of any pension rights already in payment at 6 April 2006.

If the member qualifies for enhanced protection, you can put the pension rights into payment in full and the lifetime allowance charge does not apply.

Enhanced protection valid

When an individual notifies HMRC that they intend to rely on enhanced protection for their pension rights, HMRC will issue a certificate to the individual confirming enhanced protection for that individual.

If the member presents the HMRC certificate to you and confirms that the certificate is still valid you can pay the benefits due without deducting the lifetime allowance charge, but if

• the member has a protected lump sum benefit valued at over £375,000 as at 5 April 2006 – see RPSM03303060
• the member has a protected lump sum benefit valued in excess of 25% of the fund as at 5 April 2006 – see RPSM03304000.

You should then

• include the payment of benefits on an Event Report and submit the Event Report to HMRC within the specified time period,
• provide the member with a P60 (or P60 substitute) at the end of the tax year in question (by 31 May following the end of the tax year),
• provide the member with a statement telling them what percentage of the standard lifetime allowance has been used up by the benefit crystallisation event (see RPSM03303080), and
• keep records for at least 6 years after the benefit crystallisation event has taken place in case HMRC decide to carry out an audit at a later date.

Enhanced protection not valid

If the certificate is no longer valid you should assume that the individual concerned does not have enhanced protection. Unless the individual has a valid certificate for primary protection, this will mean that the lifetime allowance charge will apply in the normal way. If the individual has a valid certificate for primary protection see RPSM03305000.

Member unable to provide evidence or no longer has protection

If, for any reason, the member is unable to provide you with the above evidence or no longer has enhanced protection, you will need to consider whether or not you should pay benefits without applying a lifetime allowance charge.