RPSM11103380 - Technical Pages: Lifetime allowance: The process for testing: In member's lifetime: Information from scheme: Example 2 of a statement for lifetime annuity:

Example 2 showing how the responsibility for providing a member with a statement is split where a lifetime annuity contract is purchased

Alan has £340,000 held as uncrystallised funds in two money purchase arrangements in a registered pension scheme. One arrangement holds £160,000 the other £180,000.

On 1 May 2007 Alan takes a £40,000 pension commencement lump sum and uses £120,000 to purchase a lifetime annuity (with the insurance company, George Life). A total of 10% of the standard lifetime allowance (£1.6 million for the 2007/08 tax year) crystallises. This is £40,000 (2.5%) crystallising through BCE 6 and £120,000 (7.5%) through BCE4.

The scheme administrator gives George Life details of the amount, expressed as a percentage of the standard lifetime allowance, Alan has crystallised on purchasing the lifetime annuity contract by 1 August 2007 (within 3 months of the purchase). This includes the percentage used in relation to the linked pension commencement lump sum.

By the end of the 2007/08 tax year George Life give Alan a statement telling him that he has used up 10% of the standard lifetime allowance in relation to his lifetime annuity entitlement with them. George Life sends Alan a similar annual statement in the 2008/09 tax year.

Alan decides to draw benefits from the remaining uncrystallised funds on 1 May 2009. He receives a pension commencement lump sum of £45,000 and designates the remaining £135,000 be used to generate an unsecured pension.

£45,000 crystallises through BCE 6 and £135,000 through BCE 1. This represents 2.5% and 7.5% of the standard lifetime allowance at that time (£1.8 million for the 2009/10 tax year).

The scheme administrator must send Alan a statement by the end of that tax year telling him that he has used up 10% of the standard lifetime allowance on the payment of the lump sum and designation to provide unsecured pension. The amount that crystallised in relation to the earlier lifetime annuity purchase is ignored (as George Life will be providing a statement covering this amount).

George Life will also again provide Alan with a statement that tax year confirming that the lifetime annuity in payment to him has used up 10% of the standard lifetime allowance.

The scheme administrator will continue sending Alan a statement every tax year (unless he fully annuitises his benefits). George Life will also continue to give Alan annual statements.

George Life is not required to provide Alan with annual statements for tax years following that in which he reaches age 75.