RPSM09104620 - Technical Pages: Member benefits: Lump sums: Serious ill-health lump sum: What is meant by an uncrystallised arrangement

If the lump sum was paid on or after 6 April 2011 you should first read RPSM09104660.

What is meant by an uncrystallised arrangement in the context of paying a serious ill-health lump sum

An uncrystallised arrangement is an arrangement in respect of which there has been no previous benefit crystallisation event (BCE).

Whilst payment of some authorised lump sum payments do not trigger a BCE, all such payments that fall outside the scope of BCE 6 (except a refund of contributions lump sum) must extinguish the member’s entitlement under the scheme. So no benefits can have been previously drawn or taken under the arrangement.

Even if there are benefit entitlements or uncrystallised funds still held in the arrangement that have not been tested for lifetime allowance purposes, the fact that part of the arrangement was previously used to generate benefits (or an earlier BCE has occurred) prevents any commutation of those entitlements/uncrystallised funds and payment as a serious ill-health lump sum. This circumstance needs to be distinguished from circumstances where the member has more than one arrangement under the scheme, and benefits under some arrangements have crystallised for lifetime allowance purposes and under others they remain uncrystallised. In this case, if the other conditions are satisfied, a serious ill-health lump sum could still be paid in respect of the rights or funds held in any uncrystallised arrangement.

[Article 33 of The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572] 

Where a member is in receipt of a pension from a scheme before 6 April 2006 a serious ill-health lump sum can only be paid in relation to a prospective right to a pension under the scheme on 6 April 2006.