RPSM03305051 - Scheme Administrator Pages:
Protecting pension rights from tax charges: Benefit payments -
primary protection: Lump sums
Lump sums
Where an individual has lump sum protection special rules on the
amount of
pension commencement lump sum that can be paid
apply. In many cases the amount that can be paid will be different
from the normal pension commencement lump sum limit.
There are three ways in which an individual with primary
protection may have lump sums paid
- Where the individual on 5 April 2006 had total lump sum rights
of more than £375,000 the individual will have protected lump
sum rights. The maximum pension commencement lump sum that can be
paid will be based on the value of the uncrystallised lump sum
rights as at 5 April 2006.
RPSM03305052 details that how much
can be paid and
RPSM03305053 explains what
information is need to pay the lump sum. This lump sum may not be
entirely tax free.
RPSM03305054 explains how this
situation arises. A
stand-alone lump sum may also be paid.
RPSM03105155 explains when a
stand-alone lump sum may be paid with primary protection.
- Where the individual on 5 April 2006 had total lump sum rights
of £375,000 or less and in a
retirement benefits scheme (or deferred annuity
contract) the individual had the right to a lump sum of more than
25%. The individual will have scheme specific lump sum protection.
RPSM03304000 explains how such lump
sums should be paid.
- Where the individual on 5 April 2006 had total lump sum rights
of £375,000 or less and in any pension scheme did not have the
right to a lump sum of more than 25%. This individual has no lump
sum protection. Lump sums will be paid under the normal rules
– see
RPSM09104100.
It is not possible to pay a pension commencement lump sum if the
member does not have any available
lifetime allowance left, i.e. they have already
crystallised benefits of more than their protected lifetime
allowance. In these circumstances the lump sum would be a
lifetime allowance excess lump sum – see
RPSM09105200.
