RPSM11104115 - Technical Pages: Lifetime allowance: Valuing benefits on BCEs: Drawdown pension - BCE 5B: A hybrid arrangement and age 75 on or after 6 April 2011

Note: This page has no application where a member reached age 75 before 6 April 2011 (see RPSM11104110).

A hybrid arrangement and age 75 on or after 6 April 2011

From 6 April 2011, where a member of a hybrid arrangement comes to their 75^th birthday and has uncrystallised entitlements under the arrangement, and those entitlements could potentially be provided on either a money purchase or defined benefits basis, the capital value of those benefits are still tested for lifetime allowance purposes at that point. The crystallised value of those benefits is calculated in two different ways, with the larger of those two measures being taken to be the amount crystallising at that point.

Firstly, the crystallised value of the benefits that would be provided under the arrangement at that time if benefits were provided on a money purchase basis is calculated, i.e. as if the arrangement was providing benefits as a money purchase arrangement at that point.

Secondly the crystallised value of the benefits that would be provided under the arrangement at that time if benefits were provided on a defined benefits basis is calculated, i.e. as if the arrangement was providing benefits as a defined benefits arrangement at that point.

A test is firstly carried out on the assumption that the uncrystallised funds held in the arrangement on the day the member reaches age 75 are remaining unused funds giving rise to a BCE 5B. Secondly a test is carried out on the assumption that defined benefits are to be provided at that point under the arrangement, with those undrawn rights being tested as they would through BCE 5.

The higher figure becomes the amount crystallising for lifetime allowance purposes at that point.

This is explained in more detail on RPSM11104650 and RPSM11104665, where an example is given.