RPSM13100290 - Technical Pages: International: Enhancement: Non-residence factor: Example 1 for a defined benefits arrangement

Example 1 of how to calculate the non-residence factor for a defined benefits arrangement

Vicky began working overseas on 6 December 2006 and so she became a relevant overseas individual on 6 April 2007. She began to accrue benefits under her defined benefits arrangement on 6 November 2006. The latest date for the purposes of step a. on RPSM13100280 is therefore 6 April 2007.

Vicky’s pension entitlement as at 6 April 2007 was £40,000 p.a. She had an option under the rules of the registered pension scheme defined benefits arrangement to commute part of her pension entitlement for a lump sum on retirement. She was not entitled to a separate lump sum.

£40,000 x 20 = £800,000

Vicky returned to work in the UK on 6 June 2009 and so she ceased to be a relevant overseas individual on 5 April 2009. That was before a benefit crystallisation event and before she ceased to accrue benefits under the defined benefits arrangement. Her pension entitlement as at 5 April 2009 was £56,500 p.a.

£56,500 x 20 = £1.13 million

£1.13 million - £800,000 = £330,000

The defined benefits arrangement non-residence factor is therefore 0.2. That is calculated by dividing £330,000 by £1.65 million (the standard lifetime allowance for the 2008-2009 tax year).

£330,000/£1.65 million = 0.2