RPSM13100540 - Technical Pages: International: Enhancement: Recognised overseas scheme transfer factor: Defined benefits arrangement relevant relievable amount

How to calculate the relevant relievable amount for a defined benefits arrangement

Where the individual's arrangement under their recognised overseas pension scheme is a defined benefits arrangement, the defined benefits relevant relievable amount is established as follows:

1. multiply the individual's pension entitlement under the defined benefits arrangement as at the latest of the following dates by the relevant valuation factor of 20 (or a factor greater than 20 as agreed by HMRC):

Where the defined benefits arrangement rules provide for a separate lump sum that is not a commutation of pension it is necessary to take that into account as well. That is done by adding to the amount resulting from the above calculation the separate lump sum entitlement that the individual has under the defined benefits arrangement as at the latest date above. This only applies if the lump sum entitlement is not linked to the individual's pension entitlement so that their prospective pension entitlement is not reduced as a result of taking the lump sum.

2. multiply the individual's pension entitlement under the defined benefits arrangement as at the earliest of the following dates by the relevant valuation factor of 20 (or a factor greater than 20 as agreed by HMRC):

Where the defined benefits arrangement rules provide for a separate lump sum that is not a commutation of pension it is necessary to take that into account as well. That is done by adding to the amount resulting from the above calculation the separate lump sum entitlement that the individual has under the defined benefits arrangement as at the earliest date above. This only applies if the lump sum entitlement is not linked to the individual's pension entitlement so that their prospective pension entitlement is not reduced as a result of taking the lump sum.

3. deduct the result of a. from the result of b.
   
4. If the individual had not been a relevant overseas individual during another part of the overseas arrangement active membership period (see RPSM13100490) relating to the same defined benefits arrangement then the amount calculated in the same way in respect of that other part-period should be added to the amount at c.

The individual's pension entitlement under the defined benefits arrangement is the annual rate of pension which would be payable to or in respect of the individual if they became entitled to payment of it at the applicable date (as determined under a or b above). The individual's lump sum entitlement under the defined benefits arrangement is the amount of lump sum which would be payable to or in respect of the individual if they became entitled to payment of it at the applicable date. Both the pension entitlement and the lump sum entitlement are established using the valuation assumptions set out in section 277. They 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.

RPSM13100550 and RPSM13100560 give some examples.