RPSM11102080 - Technical Pages: Lifetime allowance: When you test for the lifetime allowance: Age 75 and money purchase arrangements

Testing against the lifetime allowance at age 75: money purchase arrangements (including cash balance arrangements)

Any uncrystallised funds held in a money purchase arrangement (including a cash balance arrangement) when the member reaches their 75th birthday are deemed to have been designated to provide an unsecured pension under the arrangement in question. This means that

• if the member already holds an unsecured pension fund under the arrangement those uncrystallised funds are automatically absorbed into that existing unsecured pension fund immediately before they reach 75, or
• if the member has no unsecured pension fund already under the arrangement those uncrystallised funds are automatically treated as creating such a fund under that arrangement.

In both cases the deemed designation will trigger BCE 1, with the amount crystallising being the value of the uncrystallised funds held at that point. This occurs whether or not the member subsequently decides to use those funds to purchase a lifetime annuity contract or scheme pension or use them to generate an alternatively secured pension.

RPSM11104100 explains how the crystallised value of any uncrystallised funds is calculated at this point under a cash balance arrangement.

There is no entitlement to a pension commencement lump sum in connection to this deemed designation, so all of the uncrystallised funds held fall within BCE 1.

The point of designation is immediately before the member reaches age 75 – so just before midnight (23:59 hrs) the day before that birthday. This is the effective date funds need to be valued for BCE 1 purposes.