RPSM11300060 - Administrator Pages: Lifetime allowance: How the lifetime allowance is operated

How can the lifetime allowance be enhanced?

A lifetime allowance enhancement factor determines how much extra can be added to the standard lifetime allowance in order to obtain an individual’s personal lifetime allowance. The enhancement factor enables an additional amount to be crystallised without incurring a lifetime allowance charge. It is expressed as a fraction of the prevailing standard lifetime allowance at the time that the factor arose.

Therefore for example if the standard lifetime allowance was £1.5 million and the scheme received a transfer from an overseas pension scheme of £750,000 the enhancement factor would be 0.5 effectively giving the member a lifetime allowance of 150% of the standard lifetime allowance at any future BCEs – see RPSM11101090.

If a member believes that they are eligible for a lifetime allowance enhancement factor they must obtain a certificate from HMRC – see RPSM11101080.

If the member is the owner of such a certificate they must inform the scheme administrator before a BCE occurs if they intend to use their enhanced lifetime allowance. The member must tell the scheme administrator the reference number on the certificate if they intend taking advantage of an enhanced lifetime allowance at a BCE. The scheme administrator must then tell HMRC the reference number quoted by the member that will allow HMRC to undertake the appropriate checks.