RPSM11102030 - Technical Pages: Lifetime allowance: When you test for the lifetime allowance: Simultaneous BCEs
Where BCEs occur simultaneously
Normally BCEs use up a member’s available lifetime allowance in the chronological order in which they occur. But it is possible that some of the eleven BCEs (i.e. BCEs 1-9 and 5A) will occur simultaneously. A common example would be where the member becomes entitled to a scheme pension and a pension commencement lump sum under the same scheme on the same date.
Where more than one BCE occurs on the same date the member must decide the order the BCEs take for the purpose of the lifetime allowance test. This is important where the member’s lifetime allowance is breached at that point, as the order the BCEs are considered will determine where the excess will fall. The exception is where a pension commencement lump sum is being paid (so a BCE 6 occurs), when that event will always be viewed as occurring before the crystallisation of the associated pension benefit (so before the associated BCE 1, 2 or 4, as appropriate). RPSM11104730 explains this in more detail.
Where simultaneous events occur under different registered pension schemes, or different arrangements within a registered pension scheme, the member will also have to decide the order in which the BCEs are to be treated as occurring and hence on which BCE(s) under which scheme/arrangement any chargeable amount will arise.
Whether or not simultaneous BCEs are likely to occur, and if so the order they should be considered, is something the scheme administrator will want to ascertain from the individual when they contact the member before the BCE occurs (see RPSM11103130 and RPSM11103140).
Where the member breaches their lifetime allowance when crystallising benefits under a registered pension scheme the payment of any lifetime allowance excess lump sum must always be treated for lifetime allowance purposes as having occurred after all other BCEs. This is because the member must have used up all their lifetime allowance before such a lump sum can be paid (so the amount crystallising through BCE 6 relating to that payment will be the last BCE). The example on RPSM11105070 explains this.
The position is different where dealing with the payment of a relevant lump sum death benefit. If two or more BCE 7s occur following the death of a member then, for the purposes of comparing the amounts crystallising at those BCEs with the member’s available lifetime allowance, those BCEs are deemed to have occurred at the same time - see RPSM11105520.