RPSM13100240 - Technical Pages: International: Enhancement: Non-residence factor: Cash balance arrangement

How to calculate the non-residence factor for a cash balance arrangement

[s222(3)-(5)] [s277]

For each part of an active membership period (see RPSM13100130) during which the individual is a relevant overseas individual (see RPSM13100140), the cash balance arrangement non- residence factor is established as follows:

  1. obtain the value of the individual's rights under the cash balance arrangement as at the latest of the following dates:
  • the date when the individual became a relevant overseas individual
  • the date when benefits first began to accrue to or in respect of the individual under the cash balance arrangement, and
  • 6 April 2006.
  1. obtain the value of the individual's rights under the cash balance arrangement as at the earliest of the following dates:
  • immediately before the benefit crystallisation event,
  • the date when the individual ceased to be a relevant overseas individual, and
  • the date when benefits ceased to accrue to or in respect of the individual under the cash balance arrangement.
  1. deduct the value of a. from the value of b.
  2. express the resulting amount in c. as a factor of the standard lifetime allowance as at the earliest date in b.

If there was an earlier part of the active membership period relating to the same arrangement during which the individual was a relevant overseas individual the two factors for the two part- periods should be aggregated.

The individual's rights under the cash balance arrangement are represented by the amount which would be available to provide benefits to or in respect of the individual if they became entitled to the immediate payment of them at the applicable date (as determined under a or b above). The value of the individual's rights is established using the valuation assumptions set out in section 277. These are as follows:

  • the individual concerned has reached any designated age as must have been reached to avoid any reduction in their benefits on account of their age, and
  • their benefits should be valued on the basis that they are not physically or mentally impaired.

RPSM13100250 gives an example of how to calculate the non-residence factor for a cash balance arrangement.

Exceptionally, the opening value calculated at a above is modified where the individual has also notified HMRC that they are claiming primary protection under paragraph 7(1)(b) of schedule 36 (see RPSM03102010). That is to prevent the individual qualifying for two lifetime allowance enhancement factors in respect of the same increase in benefits. Guidance on how that calculation is modified is provided at RPSM13100255.

Glossary ( RPSM20000000)

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