RPSM06101020 - Technical Pages: Annual allowance: Up to 5 April 2011: The pension input amount for cash balance arrangements: Valuing pension growth

Valuing pension growth

This guidance explains the annual allowance rules up to 5 April 2011. If you want to know how the annual allowance works after that date see RPSM06105000.

For cash balance arrangements the pension input amount is the amount by which an individual’s rights under the arrangement have increased over the pension input period. There is such an increase when the closing value of an individual’s rights exceeds the opening value.

Both the opening value and the closing value of the individual’s rights are the amounts that would be available for the provision of benefits to or in respect of the individual on the assumption that the individual became entitled to them on the calculation dates specified, i.e. the beginning and end of the pension input period. For this purpose, it is assumed that the rights under the arrangement are not affected by any scheme provision to discount pension rights by an actuarial reduction for early payment. Also that any calculation of rights for ill-health under the scheme provisions are ignored.

But the pension rights regarded as increasing during the course of the pension input period ending in the tax year concerned would be adjusted according to the factors explained in RPSM06101030 to RPSM06101060.