RPSM03109042 - Technical Pages: Protecting pension rights from tax charges: Death benefits: Enhanced protection event sequence

Enhanced protection and death benefits - the sequence of events

On death the ‘rules’ for enhanced protection continue to work as usual. Benefit crystallisation events (payments of defined benefits lump sum death benefits and uncrystallised funds lump sum death benefits) occur in their actual sequence and enhanced protection is retained or lost depending on whether ‘relevant benefit accrual’ occurs.

The payment of an uncrystallised funds lump sum death benefit from an other money purchase arrangement is not ‘relevant benefit accrual’ and so cannot trigger loss of enhanced protection.

The payment of an uncrystallised funds lump sum death benefit from a cash balance arrangement and the payment of a defined benefits lump sum death benefit from a defined benefits arrangement will be tested against the ‘appropriate limit’ calculated as at the date of payment. The ‘appropriate limit’ will be based either on the value of the deceased member’s pension rights on 5 April 2006 or on the value of the ‘pre-commencement rights to death benefits’ on 5 April 2006. The payment of a lump sum death benefit that exceeds the available amount of the ‘appropriate limit’ will trigger loss of enhanced protection – see RPSM03109044.