RPSM04104700 - Technical Pages: Taxation: Unauthorised payments: Unauthorised payments surcharge: Valuing uncrystallised rights – defined benefit arrangements

Valuing uncrystallised member rights in a defined benefits arrangement

[s212(6)]

For defined benefit arrangements, the value of a member’s uncrystallised rights on the valuation date is represented by the formula

(RVF x ARP) + LS

RVF = the relevant valuation factor in accordance with section 276. This will be 20 unless HMRC has agreed to the use of an alternative valuation factor greater than 20 (see RPSM11104230)

ARP = the annual rate of pension the member would be entitled to if they became entitled to the actual payment of benefits on the valuation date

LS = the amount of any separate lump sum, i.e. it is not provided by commutation, the member would be entitled to if the member had an actual right to the payment of the lump sum on the valuation date.

For both the annual rate of pension (ARP) and the amount of the lump sum (LS) it should be assumed

  • where the amount of the immediate benefit would be reduced because the member had not reached a specified age, the benefit should be calculated assuming the member has reached the specified age; and
  • the member is deemed to be in good physical and mental health.

RPSM04104710 gives an example of valuing a member’s uncrystallised rights in a defined benefits arrangement.

Glossary ( RPSM20000000)

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