RPSM11103400 - Technical Pages: Lifetime allowance: The process for testing: In member's lifetime: Information from scheme: Recording reduced lifetime allowance due to pre commencement pension

How the reduction of a member’s available lifetime allowance at that first BCE by any pre-commencement pensions in payment is recorded for member statement purposes

The legislation does not prescribe any particular method for recording the reduced lifetime allowance due to a pension that commenced prior to 6 April 2006. Scheme administrators of registered pension schemes therefore have flexibility in developing effective practices and procedures for recording the lifetime allowance reduction due to a pre-commencement pension.

Scheme administrators should take reasonable steps to establish whether the member has a pre-commencement pension at the first BCE after 6 April 2006 and to quantify the level of pension in payment (or in the case of an unsecured pension the maximum that could be paid). Typically this will involve asking the member for the relevant information.

Providing that all reasonable steps have been taken to establish the necessary information then the scheme administrator should be able to rely on a 'good faith' defence against any lifetime allowance charge that might arise if the inaccurate calculation of the reduction in member's available lifetime allowance results in the member's lifetime allowance being exceeded by the BCE. More information about the 'good faith' defence is given in RPSM11105330.

The amount of lifetime allowance used by a pre-commencement pension should not be included in the BCE statement or annual statement issued by the scheme administrator of the scheme with the first BCE. This is to ensure there is no uncertainty about whether a statement includes the amount of lifetime allowance used by the pre-commencement pension or not. Instead, once the amount of lifetime allowance used by the pre-commencement pension is identified, the member will be able to provide that information to scheme administrators of schemes where BCEs occur in future.