RPSM11104060 - Technical Pages: Lifetime allowance: Valuing benefits on BCEs: Drawdown (before 6 April 2011 unsecured) pension - BCE 1: When the event is triggered

Whenever a member designates that funds held in a money purchase arrangement should be made available to provide a drawdown (before 6 April 2011 an unsecured) pension a lifetime allowance test is triggered through BCE 1. This happens whenever funds are first designated under an arrangement as being available to provide a drawdown (before 6 April 2011 an unsecured) pension (and a drawdown (before 6 April 2011 an unsecured) pension fund is first created under the arrangement). It also happens at any later date whenever all or part of any uncrystallised funds still held in that arrangement are absorbed into the drawdown (before 6 April 2011 unsecured) pension fund through additional fund designation.

So every time a review of maximum drawdown (before 6 April 2011 unsecured) pension levels is triggered in an arrangement due to fund designation or additional fund designation a lifetime allowance test through BCE 1 will take place.

For the avoidance of doubt a test will not be triggered where a review of drawdown (before 6 April 2011 unsecured) pension limits takes place at the three (previously five) year review point or a pension sharing event occurs (see RPSM09102420 and RPSM09102480 respectively). It is only where new, uncrystallised funds are introduced to the drawdown (before 6 April 2011 unsecured) pension fund that a test will be triggered through BCE 1, or where a review is triggered through BCE 4 or BCE 2 due to an annuity purchase or provision of a scheme pension (see RPSM09102460). In the latter case there are rules to ensure that credit is given to any earlier amount crystallising through BCE 1 when calculating the amount crystallising through BCE 4 or BCE 2 (see RPSM11104080).

BCE 1 only catches money purchase arrangements as only a money purchase arrangement can provide a drawdown (before 6 April 2011 an unsecured) pension (‘pension rule 4’, s165 FA 2004).