RPSM11104070 - Technical Pages: Lifetime allowance: Valuing benefits on BCEs: Unsecured pension - BCE 1: Calculating the capital value of the drawdown (before 6 April 2011 unsecured) pension

Calculating the capital value of the drawdown (before 6 April 2011 unsecured) pension that crystallises through BCE 1

It should be a relatively straightforward process to identify the capital value of the drawdown (before 6 April 2011 unsecured) pension rights as they arise. This is because the capital used to generate the drawdown (before 6 April 2011 unsecured) pension is clearly identifiable. It is the drawdown (before 6 April 2011 unsecured) pension fund at outset, or the uncrystallised funds brought into that fund where additional fund designation occurs at a later date.

The legislation measures the amount crystallising by reference to the sums and market value of the assets that are designated. This market value is defined in the legislation. The assets held in the drawdown (before 6 April 2011 unsecured) pension fund/uncrystallised funds have to be valued in accordance with s272 of the Taxation of Chargeable Gains Act 1992 and s278(2) to (4) of Finance Act 2004 (where dealing with a right or interest in respect of money lent directly or indirectly to certain parties).

RPSM11104130 gives an example.

Where a chargeable amount arises, any lifetime allowance charge paid by the scheme administrator effectively forms part of that chargeable amount. The amount crystallising through BCE 1 will be the actual amount designated to provide a drawdown (before 6 April 2011 an unsecured) pension (net of any deduction made by the scheme administrator to cover any lifetime allowance charge due). The chargeable amount will be what crystallises (net) through BCE 1 (and any other BCE), over and above the member’s available lifetime allowance, plus the charge paid by the scheme administrator. RPSM11105220 explains why this is and gives more detail.