RPSM09105030 - Technical Pages: Member benefits: Lump sums: Trivial commutation lump sum: Valuing uncrystallised rights

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

Valuing pension rights: uncrystallised rights

Rights the member holds under any registered pension schemes that have not crystallised yet for lifetime allowance purposes, i.e. where no right to a benefit in payment has arisen yet, must be included in the pension rights valuation for trivial commutation purposes. This will include the uncrystallised rights that the member wishes to commute.

As these benefits have not crystallised for lifetime allowance purposes, a capital value will not have been attributed to these uncrystallised rights. However, the legislation already provides a prescribed way of valuing these uncrystallised rights, where dealing with a surchargeable unauthorised member payment. Here the legislation defines uncrystallised rights depending on the nature of the arrangement those rights are held in (i.e. whether a cash balance arrangement, money purchase arrangement, defined benefits arrangement or a hybrid arrangement). The legislation simply ‘piggybacks’ on to these clauses here.

As benefits have not crystallised under the arrangement, the legislation needs to cover all four arrangement types. RPSM04104670 explains how the value of these uncrystallised rights is calculated for each of the four types of arrangement.

For the avoidance of doubt, there is no distinction for the above purposes between rights that have accrued direct in an arrangement, and those that have been transferred in. The term uncrystallised rights catches all the member’s rights under the arrangement.