RPSM09104990 - Technical Pages: Member benefits: Lump sums: Trivial commutation lump sum: Valuing benefits that crystallised on or after 6 April 2006

If the lump sum was paid on or after 6 April 2011 you should first read RPSM09105085.

Valuing relevant crystallised pension rights - crystallisation of benefits on or after 6 April 2006

[Para 8(1)(b) & (3), Sch 29] [Regs 13 and 14, The Registered Pension Schemes (Provision of Information) Regulations 2006 - SI 2006/567] 

After a BCE occurs, the scheme administrator will provide the member with a statement confirming the amount that individual has crystallised for lifetime allowance purposes under that scheme (both at that event and any earlier events). The statement will confirm the total percentage of the standard lifetime allowance that has been crystallised in respect of the individual under the scheme. This certificate will either be sent every tax year up to and including the tax year in which the member reaches age 75 or, where no pension is in payment, within 3 months of any BCE.

This percentage value is applied to the level of standard lifetime allowance that applies for the tax year in which the nominated date falls to obtain the value of an individual’s crystallised pension rights under that scheme on that date.

As the commutation limit is determined by reference to the standard lifetime allowance, any pension benefits that have already come into payment are adjusted by the change in the standard lifetime allowance from the date that the rights crystallised to the start of the commutation period.

As with the calculation of an individual’s available lifetime allowance at any given point, this adjustment of the amount actually crystallising at a BCEover time by reference to the upward movement of the standard lifetime allowance is represented by the formula

RPSM11104000 explains how this crystallised value is calculated at the time of the BCE, depending on which of the eight different BCEs had occurred.

See RPSM09105000 for an example.