RPSM11104080 - Technical Pages: Lifetime allowance: Valuing benefits on BCEs: Drawdown (before 6 April 2011 unsecured) pension - BCE 1: Prevention of overlap on providing a lifetime annuity or scheme pension

Prevention of overlap where drawdown (before 6 April 2011 unsecured) pension fund is used to purchase a lifetime annuity or provide a scheme pension

Where all or part of a drawdown (before 6 April 2011 an unsecured) pension fund is used to purchase a lifetime annuity contract or applied to provide a scheme pension a further BCE is still triggered in the same way as it would if uncrystallised funds were used or applied in this way. BCE 4 will be triggered on the purchase of a lifetime annuity and BCE 2 will be triggered on the provision of a scheme pension.

As the funds used to secure that benefit payment have already been tested for lifetime allowance purposes at the point they became part of the drawdown (before 6 April 2011 unsecured) pension fund the legislation allows for this when calculating the amount crystallising for lifetime allowance purposes at that later event.

This is referred to in the legislation as ‘prevention of overlap’ and is explained again in RPSM11104270 and RPSM11104540.