RPSM11100060 - Technical Pages: Lifetime allowance: Basic principles: How you calculate how much lifetime allowance is used up at a BCE
In order to find out the percentage of lifetime allowance used up at a BCE, the scheme administrator needs to establish the capital value of the benefit entitlements being caught through the BCE. This is referred to in the legislation as the amount that crystallises at that event (hence we have the term benefit crystallisation event). Where a lump sum is being paid this capital value is simply the amount actually paid. Where a pension benefit is being paid an equivalent capital value needs to be established for that benefit.
Each of the eleven forms of BCE that trigger a lifetime allowance test cover different circumstances where a particular type of benefit entitlement (or entitlements) should be tested for lifetime allowance purposes. For example, one BCE catches the payment of certain lump sum payments to the member, another catches an arising entitlement to a scheme pension, another the purchase of a lifetime annuity and so on. The legislation prescribes a specific valuation method for each of the eleven BCEs, and one that is suitable for the specific form of benefit entitlement being tested.
How this crystallised value is calculated at each of these various events is explained on RPSM11104000 onwards.