RPSM13100250 - Technical Pages: International: Enhancement: Non-residence factor: Example for a cash balance arrangement

Example of calculating the non-residence factor for a cash balance arrangement

Lee began to accrue benefits under his cash balance arrangement on 6 April 2004. He was seconded to work overseas on 24 October 2006 so he became a relevant overseas individual on 6 April 2007. The value of his pension rights in his cash balance arrangement as at 6 April 2007 amounted to £500,000.

Lee returned to work in the UK on 6 May 2011 (before a benefit crystallisation event and before he ceased to accrue benefits under the cash balance arrangement). He therefore ceased to be a relevant overseas individual on 5 April 2011. The value of his pension rights in his cash balance arrangement as at 5 April 2011 amounted to £950,000.

£950,000 - £500,000 = £450,000

The cash balance arrangement non-residence factor is therefore 0.25. That is calculated by dividing £450,000 by the standard lifetime allowance for the 2010-2011 tax year (£1.8million).

£450,000/£1.8 million = 0.25