RPSM09105300 - Technical Pages: Member benefits: Lump sums: Commuted equivalent pension benefits (EPBs)
Commuted equivalent pension benefits (EPBs)
[section 164(f)] and [Reg 2(a) The Registered Pension Schemes (Authorised Payments) Regulations 2006 - SI 2006/209]
In addition to the authorised payments under the 'lump sum rule', regulations can also provide that other types of lump sum can be authorised payments when they are made by registered pension schemes.
Regulations have been made to cover the payment of certain lump sums representing commuted equivalent pension benefits (contracted-out rights earned between 1961 and 1975). Such a payment is an authorised payment providing it is made in accordance with the relevant Department for Work and Pensions legislation (as described in regulation 2(a) of SI 2006 No 209).
HM Revenue & Customs legislation does not impose any additional conditions on payments of this type for them to be authorised payments. In particular, no ‘trivial commutation’-type valuation test is necessary for the payment of commuted EPBs to be an authorised payment. However, if other pension rights are to be commuted and paid under the trivial commutation lump sum provisions, the value of any EPBs must be taken into account for the purposes of comparing the value of the member’s total pension rights with the 1% of lifetime allowance figure.