RPSM03305030 - Scheme Administrator Pages: Protecting pension rights from tax charges: Benefit payments - primary protection: Standard lifetime allowance exceeded

The value of cumulative benefit crystallisation events is more than the standard lifetime allowance

If the following percentages exceed 100% of the standard lifetime allowance,

• the value of the current benefit crystallisation event divided by the standard lifetime allowance for the year in which the crystallisation occurs, plus
• the value of each earlier benefit crystallisation event expressed as a percentage of the standard lifetime allowance for the year in which each benefit crystallisation event occurred (these percentages should be provided when benefits crystallise and for pensions annually to each member under the requirements of the Registered Pension Schemes (Provision of Information) Regulations 2006 - SI 2006/567 , plus
• the value of pre-commencement pensions expressed as a percentage of the standard lifetime allowance for the year in which the first benefit crystallisation event occurred in respect of the member in question ( see RPSM03301010 and RPSM03301020).

you need to know whether the member wants to rely on primary protection or any other lifetime allowance enhancement factor to protect his benefits from tax charges. If the member does not have valid protection any benefits crystallising above the standard lifetime allowance will be liable to the lifetime allowance charge.

You will need to find out from the member if they qualify for primary protection or other enhancement of the lifetime allowance. If the member has registered with HMRC for protection, they will hold a certificate issued by HMRC stating the date registered and the amount protected at 5 April 2006 (or the factor to be applied to the lifetime allowance at any benefit crystallisation event). If the member wants to take advantage of primary protection they must give you the reference number of their certificate of protection - see RPSM03305011.

You may wish to ask to see this certificate.

You can then pay an amount of benefits under the scheme rules within the limit shown on the certificate without deducting a lifetime allowance tax charge. Details of how to use the information on the certificate to calculate the amount of protected benefits are shown on RPSM03305040.

You should then

• include the payment of benefits on an Event Report and submit the Event Report to HMRC within the specified time period - see RPSM03305060,
• 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 RPSM03305070), and
• keep records for at least 6 years following the tax year in which the benefit crystallisation event has taken place in case HMRC decide to carry out an audit at a later date.