RPSM11104435 - Technical Pages: Lifetime allowance: Valuing benefits on BCEs: Augmenting a scheme pension - BCE3: Prevention of overlap under BCE3 when calculating XP: Further BCE3 occurs on or after 10 October 2007

Prevention of overlap under BCE3 when calculating XP - further BCE3 occurs on or after 10 October 2007

Once an increase in a scheme pension in payment has triggered a lifetime allowance test through BCE 3 the level of excess pension (XP) that crystallised at that point will be excluded from the calculation of XP at any future event, where that same pension is potentially increased once again beyond the permitted margin at that time.

Where BCE 3 is triggered more than once, the notional XP at the latest point is discounted by the XP, or the total of the XP amounts, that crystallised at those earlier events.

How the XP, or the total of the XP, that crystallised at those earlier events reduce the XP at the later event depends on whether the future BCE 3 occurred on or after 10^th October 2007 or before that date.

RPSM11104430 explains how the XP, or the total of the XP, are discounted in respect of further BCE 3 events occurring before 10^th October 2007.

Where the further BCE 3 occurs on or after 10^th October 2007, the XP at that further event is discounted by increasing the XP, or the total of the XP, that crystallised at those earlier BCE 3 events by the greater of ‘calculation A’ and ‘calculation B’.

Calculation A involves increasing each XP that crystallised at an earlier BCE 3 event by the ‘relevant annual percentage rate’ (see RPSM11104436).

Calculation B involves increasing each XP that crystallised at an earlier BCE 3 event by the ‘relevant indexation percentage’ (see RPSM11104437).

An example is given in RPSM11104438.