RPSM03307037 - Scheme Administrator Pages: Protecting pension rights from tax charges: Benefit payments - other forms of protection: Pension age – member information

What information should be provided to the member when paying benefits before normal minimum pension age?

[Regs 7, 14 & 16 The Registered Pension Schemes (Provision of Information) Regulation 2006 – SI 2006/567] [Para 19(6) Sch 36]

When benefits crystallise the scheme administrator must provide the member with a statement detailing the percentage of the standard lifetime allowance used up by the benefit crystallisation event. This statement must be provided to the member within 3 months of the benefit crystallisation event, and where the benefit crystallisation event is a pension the statement must be provided at least once in a tax year thereafter. RPSM12303030 provides more information about this statement.

Member has reduced lifetime allowance

Where the member has a reduced lifetime allowance (see RPSM03307036) and the amount of benefits crystallised is more than the reduced lifetime allowance the percentage of the standard lifetime allowance used up should be based on the amount crystallised at the benefit crystallisation event below the reduced lifetime allowance.

Example

Using the example shown in RPSM03106090 Boris would receive the following statements.

Boris crystallises £1 million when the standard lifetime allowance is £1.5 million. However his reduced lifetime allowance is £975,000 so only £975,000 is free of the lifetime allowance charge. Boris gets a statement from his scheme administrator showing that he has used up 65% of the standard lifetime allowance

£975,000/£1,500 000 x 100 = 65%

Boris later crystallises £500,000 when the standard lifetime allowance is £1.95 million. However because of his previous benefit crystallisation only £48,750 is free of the lifetime allowance charge; the remaining £451,250 is taxable. Boris will receive another statement showing that he has used up just 2.5% of the standard lifetime allowance. This is because the amount crystallised in the benefit statement will be based on only the £48,750 that was not liable to the lifetime allowance charge.

£48,750/£1,950,000 x 100 = 2.5%