RPSM11104730 - Technical Pages: Lifetime allowance: Valuing benefits on BCEs: Relevant lump sums - BCE 6: The effective date of the event

Effective date of event

Payment of a pension commencement lump sum

A pension commencement lump sum may only paid where an entitlement to certain pension benefits arises. This is the time a scheme pension, lifetime annuity or income withdrawal entitlement first arises under a registered pension scheme, where derived from uncrystallised funds, or their equivalent in a defined benefits arrangement.

The date BCE 6 is triggered will be the date the actual entitlement to the linked pension benefit arises. RPSM11102050 and RPSM11102055 describe pension and lump sum entitlement in more detail.

The entitlement to that lump sum is deemed to arise immediately before the date the entitlement to the connected pension benefit arises, whether the lump sum is actually paid at that time or within the acceptable time window (see RPSM09104120). This means the lump sum will crystallise before the crystallisation of the connected pension benefit (so BCE 6 will be before BCE 1, BCE 2 or BCE 4, as appropriate.

The reason for this is to ensure that a pension commencement lump sum entitlement can be paid where the member is near their lifetime allowance limit, albeit possibly at a reduced rate due to the level of available portion of the member’s lump sum amount. If the crystallisation of the pension commencement lump sum through BCE 6 took place after the crystallisation of the linked pension benefit (through BCE 1, 2 or 4) there might be no available lifetime allowance left at all (and so no pension commencement lump sum could be paid).

RPSM09104510 explains the meaning of available portion of the member’s lump sum amount.

Other relevant lump sums

The effective date of BCE 6 for a serious ill-health lump sum or a lifetime allowance excess lump sum is the date the member obtains an actual right to the payment.