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 be 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. An exception to this rule is where an individual is being paid a scheme specific protected pension commencement lump sum (see RPSM03105516) arises. Where the conditions at RPSM03105516 are met a special type of trivial commutation lump sum may be paid instead of a pension.
The date BCE 6 is triggered will be the date the actual entitlement to the linked pension benefit (or trivial lump sum as set out at RPSM03105516) arises. RPSM11102050 and RPSM11102055 describe pension and lump sum entitlement in more detail.
Note that there is no BCE 6 where a pension commencement lump sum is paid in relation to a money purchase arrangement after 6 April 2011, and the individual becomes entitled to it before reaching the age of 75 but it is not paid to them until after they have reached age 75 (see RPSM11102055).
Leaving aside cases where the member might die before their pension entitlement can be established, entitlement to their pension commencement lump sum is deemed to arise immediately before their entitlement to the connected pension benefit (or trivial lump sum as per RPSM03105516) arises, whether the lump sum is actually paid at that time or at some other point within the acceptable time window (see RPSM09104120 and linked pages). 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.