RPSM09104520 - Technical Pages: Member benefits: Lump sums: Pension commencement lump sum: Maximum amount: Available portion: Establishing the available portion

Establishing the available portion of the member’s lump sum allowance where the member is entitled to the standard lifetime allowance

The available portion of the lump sum allowance is straightforward to calculate where the member’s lifetime allowance is the standard lifetime allowance, i.e. where there is no entitlement to an enhanced lifetime allowance. Here, the lump sum allowance is the percentage of the member’s lifetime allowance that the member has available at that point, as applied to the standard lifetime allowance for that particular tax-year. And 25% of this figure is the available portion of that lump sum allowance.

If the result comes out as a negative figure there is no available portion of the member’s lump sum allowance and the permitted maximum will be nil.

Before crystallising benefits and making any payments the scheme administrator should satisfy themselves that the member has enough available lifetime allowance to cover the benefits crystallising at the time the pension commencement lump sum crystallises through BCE 6 (see RPSM11103120). They are also likely to clarify whether the member is entitled to an enhanced lifetime allowance.

Where the scheme administrator is satisfied that the member is subject to the standard lifetime allowance, and has enough available lifetime allowance to cover the benefit crystallisation events (BCE)s occurring, the scheme administrator knows that the available portion of the lump sum allowance is not an issue. They know that this will be higher than the applicable amount, and so the maximum payment will be the applicable amount calculation.

The example on RPSM09104550 illustrates this.