RPSM11103320 - Technical Pages: Lifetime allowance: The process for testing: In member's lifetime: Information from scheme: Statement given to the member after the BCE

The statement the scheme administrator must provide to the member after the BCE has taken place (or every tax year)

Where a pension entitlement arises under the scheme following the BCE

Where a pension is being paid to a member from a registered pension scheme the scheme administrator must provide that member with a statement every tax year up to and including the tax year in which the member reaches age 75. The statement should confirm

• the total percentage of the standard lifetime allowance they have expended by BCEs in respect of the member under that scheme (under any BCE, both in that or earlier tax years, but not counting any BCEs that relate to rights that have been transferred out of the scheme), and
• include in this figure any amount that has crystallised previously in relation to that individual under another scheme, where the related benefits have subsequently been transferred into the scheme.

This may be done through a single statement or more than one statement issued to the member.

RPSM11103330 gives more information on how these statements should be expressed.

Where uncrystallised funds are designated under a money purchase arrangement to provide a drawdown (before 6 April 2011 an unsecured) pension a pension is deemed to be in payment for the purposes of providing a notice, whether or not a pension is actually drawn.

Where the member qualifies for and made a valid declaration to the scheme administrator that they wish to take their drawdown pension as flexible drawdown rather than capped drawdown (see RPSM09103590) and has drawn down their entire drawdown pension fund. the obligation to provide an annual statement continues to apply for the tax years following that in which the drawdown pension fund is exhausted until the tax year following that in which the member reaches age 75. This is because the member still needs to know how much lifetime allowance they used up when they designated the funds as available for the payment of drawdown (before 6 April 2011 unsecured) pension if they have yet to crystallise funds in that or any other arrangement(s) they hold in a registered pension scheme/schemes.

Where a pension commencement lump sum is paid after 6 April 2011 when the member is aged over 75

From 6 April 2011, a member who does not crystallise benefits until after reaching age 75 can take a pension commencement lump sum in relation to any connected pension (see RPSM09104100 onwards for more details). No BCE can arise after age 75 except for a BCE 3 (see RPSM11102070) so no BCE occurs in respect of pension and lump sum taken after age 75. For the avoidance of doubt, although for the purposes of determining whether a member has available lifetime allowance (one of the requirements for a lump sum to be a pension commencement lump sum) in relation to a pension commencement lump sum taken after age 75, there is a notional BCE in respect of any event that would have been a BCE but for the member being aged over 75 at the time the event occurred, such notional BCEs are not BCEs for any other purpose. So no statement is required in relation to such events including any pension or pension commencement lump sum taken by the member after they reach age 75.

Passing on of obligation to provide a statement from the scheme administrator to an insurance company

Where a lifetime annuity or scheme pension is purchased from an insurance company, that company will take on responsibility for providing the member with an ongoing annual statement. This will show how much lifetime allowance was used up in relation to the annuity purchase (through BCE 4 in relation to the contract purchase, and BCE 6 if a pension commencement lump sum was paid in connection with that arising entitlement). RPSM11103360 explains how this works, and the legislative requirements imposed on the scheme administrator and the insurance company.

The position on transfers is discussed in RPSM11103390.

Where there is no pension under the scheme following the BCE

If a BCE occurs where there is no pension paid from the scheme, e.g. because a serious ill-health lump sum has been paid, or BCE 5 has occurred, a one-off statement giving the above information needs to be sent to the member within 3 months of the date of the BCE. This includes a pre 6 April 2006 lump sum relating to a deferred pension, and for which a BCE will occur on 6 April 2006 in accordance with article 28 of the Taxation of Pension Schemes (Transitional Provisions) Regulations 2006 (SI 2006/572). It should be noted that no lifetime charge will arise on such lump sums, but the amount will be using up lifetime allowance. Similarly, stand-alone lump sums paid on or after 6 April 2006 where there is no associated pension, as described in the above regulations as amended by the Taxation of Registered Pension Schemes (Transitional Provisions) (Amendment No2) Order 2006 (SI 2006/2004), should be the subject of a BCE statement. But where there is an entitlement to an unsecured pension, an annual statement should be provided even if no pension is being taken.

Where a chargeable amount is crystallised

The scheme administrator needs to provide a statement (in that and subsequent tax years, where a pension is in payment), even where a chargeable amount arises (and a notice as discussed on RPSM11103310 also needs to be provided). The statement and notice may be combined in that first tax year.

Penalties

If the scheme administrator fails to provide this notice to the member within the required deadline they will be liable to penalties - see RPSM12100020.