RPSM11103370 - Technical Pages: Lifetime allowance: The process for testing: In member's lifetime: Information from scheme: Example 1 of a statement for lifetime annuity

Example 1 showing how the responsibility for providing a member with a statement is split where a lifetime annuity contract is purchased

Steve has £160,000 held as uncrystallised funds under a money purchase arrangement.

On 1 May 2007 he draws all his benefits under the arrangement. He is paid a pension commencement lump sum of £40,000 and £120,000 is used to purchase a lifetime annuity (with the insurance company, George Life).

£40,000 crystallises through BCE 6 and £120,000 through BCE 4. These amounts represent 2.5% and 7.5% of the standard lifetime allowance at that time (£1.6 million for the 2007/08 tax year).

Within 3 months of the purchase (so by 1 August 2007) the scheme administrator must provide George Life with details of the amount Steve has crystallised through the purchase of the lifetime annuity contract. This includes the linked pension commencement lump sum, expressed as a percentage of the standard lifetime allowance, i.e. the 10% total above.

George Life must provide Steve with a statement by the end of the 2007/08 tax year telling him that he has used up 10% of the standard lifetime allowance in relation to his lifetime annuity entitlement with them. They must provide such a statement every tax year (up to and including the tax year in which Steve reaches age 75).