RPSM13100300 - Technical Pages: International: Enhancement: Non-residence factor: Example 2 for a defined benefits arrangement

Example 2 of how to calculate the non-residence factor for a defined benefits arrangement

Anne began to accrue benefits under her defined benefits arrangement on 6 January 2006. She was seconded to work overseas on 6 January 2007 and so became a relevant overseas individual on 6 April 2007. The latest date for the purposes of step a. on RPSM13100280 is therefore 6 April 2007.

Anne’s pension entitlement as at 6 April 2007 was £30,000 p.a. She was also entitled to a separate lump sum of £60,000.

(£30,000 x 20) + £60,000 = £660,000

Anne returned to work in the UK on 6 May 2009 and so 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. Anne’s pension entitlement as at 5 April 2009 was £56,500 p.a. She was also entitled to a separate lump sum of £80,000.

(£56,500 x 20) + £80,000 = £1.21 million

£1.21 million - £660,000 = £550,000

The defined benefits arrangement non-residence factor is therefore 0.33. That is calculated by dividing £550,000 by £1.65 million (the standard lifetime allowance for the 2008-2009 tax year).

£550,000/ £1.65 million = 0.33