Terry holds uncrystallised benefits under two
arrangements in a
registered pension scheme.
Under arrangement A Terry is entitled to a
scheme pension of £10,000 per annum. A
pension commencement lump may be paid by commuting
part of this pension entitlement.
Arrangement B is a
money purchase arrangement holding £100,000
of
uncrystallised funds. The scheme rules state that
these funds can only be used to purchase a
lifetime annuity, although a lump sum may be
provided by commutation.
The scheme rules give Terry the option of taking his lump sum
entitlement under arrangement A through arrangement B. This
effectively allows him to aggregate his lump sum entitlements under
both arrangements A and B in arrangement B.
Terry draws a £75,000 pension commencement lump sum from
arrangement B, using the remaining £25,000 to purchase a
lifetime annuity. Arrangement A provides the full £10,000 per
annum scheme pension.
The lump sum paid under arrangement B is justified on the
basis of Terry’s total pension entitlements arising under the
scheme.
The applicable amount based on his arising scheme pension
entitlement arising under arrangement A is £66,667
(£66,667 + £200,000 {£10,000 x the relevant
valuation factor of 20}, divided by four – see
RPSM09104400).
The applicable amount based on the lifetime annuity purchase
under arrangement B is £8,333 (one third of the annuity
purchase price of £25,000 – see
RPSM09104370).
The total applicable amount is therefore £75,000. Terry
has not crystallised benefits up to the
standard lifetime allowance so the available
portion of the member’s lump sum allowance does not restrict
the applicable amount of £75,000.
RPSM09104490 provides a method for
calculating the maximum lump sum.
| Glossary ( RPSM20000000) |
