RPSM03305011 - Scheme Administrator Pages: Protecting pension rights from tax charges: Benefit payments - primary protection: Information before benefits crystallise

Information needed before benefits crystallise

[Reg 11 The Registered Pension Schemes (Provision of Information) Regulation 2006 – SI 2006/567]

If an individual wants to take advantage of primary protection they must give the scheme administrator the reference number of their certificate of primary protection. This is required by regulation 11 of the Registered Pension Schemes (Provision of Information) Regulation 2006.

A scheme administrator could also ask a member for a copy of their certificate. Alternatively if the member has completed form APSS 203 authorising HMRC to give the scheme administrator details of the certificate, the scheme administrator can view the certificate online. If a scheme administrator would prefer to receive details of the certificate in the post form APSS 209 must be completed in addition to form APSS 203.

If the individual does not give the scheme administrator details of their certificate the administrator should assume that the individual does not have primary protection. This means the lifetime allowance charge will apply in the usual way.

A scheme administrator will also need to know whether or not the individual has previously had a benefit crystallisation event from any registered pension scheme and if so how much crystallised at that event. So you will need to ask the member

• Have you had any previous benefit crystallisations – if so what percentage of the standard lifetime allowance was used up by the benefit crystallisation event(s)? The administrator(s) of the scheme(s) providing those benefits must have given the member a statement showing how much of the standard lifetime allowance has been used up by the benefit crystallisation.
• If this is the first benefit crystallisation event does the member have any pre- commencement pensions (pensions in payment on 5 April 2006)? If so what is the annual rate of the pension in payment when benefits will crystallise from your scheme?

Although scheme administrators would normally accept what a member tells them they should question any obvious inconsistencies. This may well be to a member’s advantage. For example you administer a personal pension scheme and are due to crystallise benefits for a member. They present you with a primary protection certificate showing no protected lump sums. You know that the member had the right to a lump sum under your arrangement before 6 April 2006. You also know that the member has already taken benefits before 6 April 2006 with a crystallised lump sum value of more than £375,000, i.e. the member would qualify for lump sum protection. Taking the certificate at face value the member cannot have a pension commencement lump sum. You should not act contrary to what the certificate tells you. But before paying benefits you could question what the certificate says. By raising questions you could find out the member incorrectly completed their notification for primary protection. As a result the member amends their primary protection notification, HMRC issues an amended certificate showing a protected lump sum amount and you will then be able to pay a pension commencement lump sum.