RPSM09105010 - Technical Pages: Member benefits: Lump sums: Trivial commutation lump sum: Valuing benefits that were in payment on 5 April 2006

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

Valuing relevant pension crystallised rights that were in payment on 5 April 2006 for trivial commutation purposes

Any pre-commencement pension is valued on the same basis as they would be valued for primary protection purposes, by reference to the level of that pension being paid at 5 April 2006 (not at any later BCE or on the nominated date). That figure is then adjusted to arrive at the contributing figure to the pension rights value.

So the crystallised value is calculated in the same way as explained in RPSM03101020, by multiplying the annual rate of the pension in payment as at 5 April 2006 by a conversion factor of 25.

This figure is then adjusted to reflect the rise in the standard lifetime allowance from 6 April 2006 to the tax year the nominated date falls into.

This adjustment is represented by the formula

There is no need to consider any tax-free lump sums paid before 6 April 2006. This is because of the higher conversion factor of 25 (which is set at that level on the assumption that a tax-free lump sum would have been drawn at the time the pension came into payment).

RPSM09105020 gives an example.