RPSM09105000 - Technical Pages: Member benefits: Lump sums: Trivial commutation lump sum: Example of valuing post 5 April 2006 crystallised benefits

If the lump sum was paid on or after 6 April 2011 you should first read RPSM09105085.

An example of valuing benefits that have been crystallised on or after 6 April 2006

In the 2007/08 tax year Catherine starts drawing a scheme pension of £700 per annum and is paid a pension commencement lump sum of £2,000 in relation to that pension.

These are being valued in relation to a nominated date of 1 January 2011.

The amount that crystallises at the two BCEs that occurred in 2007/08 is £14,000 through BCE 2 in respect of the arising scheme pension entitlement (20 x £700) and £2,000 through BCE 6 in respect of the lump sum paid. This is £16,000 in total and represents 1% of the standard lifetime allowance for that tax year (£1.6 million).

The scheme administrator provides Catherine with a statement confirming this fact by the end of the tax year.

On the nominated date the standard lifetime allowance is now £1.8 million. So the value of Catherine’s crystallised pension rights under the scheme on the nominated date is £18,000 (1% of £1.8 million).