RPSM03304030 - Scheme Administrator Pages: Protecting pension rights from tax charges: Benefit payments - tax-free lump sum over 25%: Taking benefits

What happens when a member takes their benefits?

To qualify for lump sum protection in excess of 25% of their rights the member must become entitled to all of their uncrystallised pension and lump sum rights under the scheme on the same day. Alternatively if the value of the member’s rights under the scheme after payment of the proposed pension commencement lump sum would not be more than £2000 and the member has available lifetime allowance a special type of trivial lump sum may be paid instead of a pension. This is not the usual trivial commutation lump sum. Conditions for payment of this special trivial lump sum are set out at RPSM03105516.Although the member may qualify for lump sum protection with your scheme, it is possible that they may have also registered a claim for enhanced protection or primary protection with HMRC, which might affect the amount of tax-free lump sum payable. So before paying benefits you should ask the scheme member whether they have registered for primary protection or enhanced protection, and if they have protection of lump sums of more than £375,000

If the member’s certificate of primary or enhanced protection shows that they have protected lump sums you should not pay out lump sum benefits under this part of the guidance. For primary protection and protected lump sums see RPSM03305051 to RPSM03305054. For enhanced protection and protected lump sums see RPSM03303050 to RPSM03303061.

If the member’s certificate of primary or enhanced protection does not mention lump sums then they have no separate lump sum protection. You may pay out lump sum benefits in accordance with this part of the guidance (RPSM03304000 to RPSM03304130).