RPSM11104110 - Technical Pages: Lifetime allowance: Valuing benefits on BCEs: Unsecured pension - BCE 1: A hybrid arrangement and member reached age 75 before 6 April 2011

Note: Following the repeal of paragraph 8(2) of Schedule 28, this page has no application where a member reached age 75 on or after 6 April 2011 (see RPSM11104115).

A hybrid arrangement and member reached age 75 before 6 April 2011

Where a member of a hybrid arrangement came to their 75^t h birthday and had uncrystallised entitlements under the arrangement, and those entitlements could potentially have been provided on either a money purchase or defined benefits basis, the capital value of those benefits were still tested for lifetime allowance purposes at that point. The crystallised value of those benefits was calculated in two different ways, with the larger of those two measures being taken to be the amount crystallising at that point.

Firstly, the crystallised value of the benefits that would be provided under the arrangement at that time if benefits were provided on a money purchase basis was calculated, i.e. as if the arrangement was providing benefits as a money purchase arrangement at that point.

Secondly the crystallised value of the benefits that would be provided under the arrangement at that time if benefits were provided on a defined benefits basis was calculated, i.e. as if the arrangement was providing benefits as a defined benefits arrangement at that point.

A test was firstly carried out on the assumption that the uncrystallised funds held in the arrangement immediately before the member reached age 75 (midnight) were designated to provide an unsecured pension at that time (based on BCE 1). Secondly a test was carried out on the assumption that defined benefits were to be provided at that point under the arrangement, with those undrawn rights being tested as they would through BCE 5.

The higher figure became the amount crystallising for lifetime allowance purposes at that point.

This is explained in more detail on RPSM11104650 and RPSM11104660, where an example is given.