HMRC internal manual

Pensions Tax Manual

Member benefits: lump sums: protection of pre-6 April 2006 lump sum rights: scheme-specific lump sum protection - overview

Glossary PTM000001
   

What is scheme-specific lump sum protection?
Conditions for scheme-specific lump sum protection
Scheme-specific lump sum protection and the lifetime allowance
Payment of a scheme-specific protected pension commencement lump sum with a trivial lump sum
Payment of a scheme-specific protected pension commencement lump sum with multiple pension types
Calculating the maximum permitted pension commencement lump sum
How to pay protected lump sum benefits exceeding 25%: examples for money purchase arrangements
How to pay protected lump sum benefits exceeding 25%: example where there is not enough available lifetime allowance
Stand-alone lump sums

What is scheme-specific lump sum protection?

Paragraphs 31 to 34 Schedule 36 Finance Act 2004

As explained at PTM063230 normally a pension commencement lump sum cannot be more than 25% of the value of their total rights coming into payment from the pension scheme. Before 6 April 2006 some individuals had the right to be paid a tax- free lump sum of more than 25% of their total under a pension scheme. Scheme-specific lump sum protection is the name given to the form protection that allows such individuals to be paid a pension commencement lump sum that is more than 25% of the value of their total benefits coming into payment from the registered pension scheme.

As the name suggest this form of lump sum protection applies to a specific pension scheme. There is no need for an individual or pension scheme administrator to claim this protection from HMRC. The legislation applies the protection automatically. However this doesn’t mean that a pension scheme has to pay the maximum allowable lump sum.

The next section Conditions for scheme-specific lump sum protection sets out the conditions for qualifying for, and using, scheme specific lump sum protection.  Note that it is possible for someone to lose this form of lump sum protection if a member transfers their rights to another pension scheme and the transfer is not a block transfer.  See PTM063150 for issues that arise regarding this protection when a transfer is made, whether or not it is a block transfer.

What this form of lump protection does is change the amount of the maximum permitted pension commencement lump sum.  In broad terms the maximum permitted pension commencement lump sum will be the value of the individual’s uncrystallised lump sum rights under the scheme on 5 April 2006, revalued to take account of changes in the lifetime allowance, plus as additional amount (ALSA) which reflects any increase in the value of the their individual’s rights benefits that has occurred since 6 April 2006.  See the section Calculating the maximum permitted pension commencement lump sum for guidance on how to calculate the maximum permitted lump.

This form of lump sum protection does not change any of the other conditions for being a pension commencement lump sum (see PTM063210).  This means that the lump sum must be paid in connection with becoming entitled to a relevant pension.  Because of this requirement, it is not possible to pay a 100% pension commencement lump sum.  There is another form of lump sum protection that allows for payment of a 100% tax-free lump sum, called a stand-alone lump sum – see the section Stand-alone lump sums below for more information.

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Conditions for scheme-specific lump sum protection

Paragraphs 31 to 33 Schedule 36 Finance Act 2004

Eligibility conditions

For an individual to be eligible for scheme-specific lump sum protection the following three conditions must be satisfied:

  1. On 5 April 2006 the individual was a member of a retirement benefits scheme or deferred annuity contract as defined at paragraph 1(1)(a) to (e) of Schedule 36 Finance Act 2004,
  2. The value of their uncrystallised lump sum rights (VULSR) under that pension scheme on 5 April 2006 was more than 25% of the value of their total uncrystallised rights (VUR) under that scheme.
  3. The individual did not notify reliance on either enhanced or primary protection, or if they did notify reliance on enhanced or primary protection their total lump sum rights was not more than £375,000. 

PTM063140 explains how to calculate VULSR and VUR to identify if an individual is eligible for scheme-specific lump sum protection.   The value of VULSR forms part of the calculation of the maximum permitted pension commencement lump sum using this form of protection.

Enhanced and/or primary protection

Different forms of lump sum protection apply to individuals with enhanced and/or primary protection if the value of their total lump sum rights on 5 April 2006 was more than £375,000.  See:

  • PTM063110 for lump sum protection with primary protection
  • PTM063120 for lump sum protection with enhanced protection.

This £375,000 limit includes not only uncrystallised lump sums but also the value of lump sums deemed to have been taken with pensions put into payment before 6 April 2006.

Regulation 9 The Registered Pension Schemes (Enhanced Lifetime Allowance) Regulations — SI 2006/131

An individual who:

  • on 5 April 2006 had total lump sum rights over £375,000, and
  • had but subsequently lost enhanced protection

may be eligible for scheme-specific lump sum protection, as long as they meet the normal conditions for this form of protection and they had not also notified reliance on primary protection.

Payment conditions

In addition to the eligibility conditions, and the normal payment rules for a pension commencement lump sum, there are two additional payment conditions that must be met relating to

  • which pension schemes can pay a scheme-specific protected lump sum, and
  • when the member must become entitled to their pension rights under the scheme. 

Which schemes can pay a scheme-specific protected lump sum

Paragraph 31(4) and (6) to (9) Schedule 36 Finance Act 2004

To qualify for scheme-specific lump sum protection, the lump sum must be paid from:

  • the retirement benefits scheme or deferred annuity contract that held the pension rights on 5 April 2006 (the original scheme) or
  • another registered pension scheme to which the member’s rights were transferred as part of a block transfer (or a series of block transfers) from the original scheme.

PTM063150 gives more information on block transfers and also explains what happens if a partial transfer is made from a protected scheme.

When the member must become entitled to their pension

Paragraph 31(3) Schedule 36 Finance Act 2004

Article 23ZA The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572

The individual must also become entitled to all of their pension rights under the scheme (ignoring any pension that was already in payment on 5 April 2006) on the same date.

Entitlement to a pension commencement lump sum arises on the day that entitlement to the linked relevant pension arises (see PTM088200). Where an individual dies within six months of the lump sum being paid but without becoming entitled to a relevant pension the ‘same day’ payment condition can still be met. The payment condition will be satisfied if the scheme administrator considers that the member would have become entitled to all their pension rights on the same date if they had not died.

Where an individual is entitled to more than one type of pension from the scheme the requirement for pension entitlement to arise on the same date is modified. The section Payment of a scheme-specific protected pension commencement lump sum with multiple pension types explains this payment rule in more detail.

If the member’s rights under the scheme after payment of the lump sum are not more than £10,000, instead of paying a ‘relevant pension’ those rights may be commuted and also paid as a lump sum.  The section Payment of a scheme-specific protected pension commencement lump sum with a trivial lump sum below gives details of when this may be done.

Scheme-specific lump sum protection and the lifetime allowance

Payment of a scheme-specific lump sum is a BCE 6 – just like any other pension commencement lump sum.  The BCE occurs when the member becomes entitled to the lump sum; that is immediately before the relevant pension crystallises.  Where the scheme-specific pension commencement lump sum is paid in connection with a trivial lump sum as described in the next section, entitlement arises immediately before payment of the trivial lump sum.

Calculating the available lifetime allowance

Paragraph 1(1)(b) Schedule 29 Finance Act 2004

The member must have available lifetime allowance when the scheme-specific pension commencement lump sum is paid.  The level of an individual’s lifetime allowance depends on whether or not they have lifetime allowance protection and the form of that protection.

If the member has no lifetime allowance protection, or has enhanced protection, their available lifetime allowance is based on the standard lifetime allowance.  For example if the standard lifetime allowance is £1 million and the member has already has BCE(s) using up 60% of the lifetime allowance their available lifetime allowance is £400,000. 

If the individual has another form of lifetime allowance protection then their lifetime allowance is based on the level of their protected lifetime allowance, for example: £1.5 million for fixed protection 2014.

Paragraph 1(3A) Schedule 29 Finance Act 2004

Where entitlement to the lump sum arises before the member is 75 but it is not paid until after the member has reached age 75, calculate the member’s available lifetime allowance as at the date the member became entitled to the lump sum.

Paragraph 12(1A) Schedule 29 Finance Act 2004

Where both entitlement and payment of the lump sum occur when the member is aged 75 or older when the lump sum is paid, for the purposes of calculating available lifetime allowance ignore any BCE 5 or BCE 5B. (This advice applies to both a pension commencement lump sum and the ‘trivial lump sum’ described in the next section.)  However lifetime allowance is used up by any event occurring in relation to member aged 75 or older if the event would have been a benefit crystallisation event if it had occurred before the member was 75.  See PTM063210 for more information and an example of calculating the available lifetime allowance for someone aged 75 or older.

Part of the lump sum may be taxable

With scheme specific lump sum protection it is possible to pay a pension commencement lump sum of more than an individual’s available lifetime allowance. If the value of the proposed lump sum calculated using the formulae below is greater than the amount of the individual’s available lifetime allowance, the whole lump sum can still be paid as a pension commencement lump sum.  However the part of the pension commencement lump sum in excess of the individual’s lifetime allowance will be subject to the lifetime allowance charge - see PTM083000.

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Payment of a scheme-specific protected pension commencement lump sum with a trivial lump sum

Article 23C The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572

For a lump sum to be a pension commencement lump sum it must be paid in connection with becoming entitled to a relevant pension. A relevant pension is income withdrawal on designation into (flexi-access) drawdown, a lifetime annuity or scheme pension - see PTM063220. However, where the payment of a scheme-specific protected lump sum sum leaves a relatively small amount to provide a pension in respect of the member the lump sum may instead be paid in connection with a ‘trivial lump sum’ - as defined below. Note that this is a special kind of trivial lump sum and it should not be confused with the usual trivial commutation lump sum.

This provision allows the total rights under the scheme to be paid in lump sum form, albeit as distinct lump sums. The scheme-specific pension commencment lump sum is payable tax-free (up to the amount of the member’s available lifetime allowance). The whole trivial lump sum is taxable as pension income at the member’s marginal rate of tax. Payment of the trivial lump sum is not a benefit crystallisation event.

What is a trivial lump sum?

Paragraph 7A Schedule 29 Finance Act 2004 as inserted by Article 23C The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572

For a lump sum to be a trivial lump sum all the following conditions must be met:

  • It is not more than £10,000 (£2,000 if paid before 27 March 2014);
  • For payments made on or after 6 April 2015, the member has reached aged 55, an earlier protected pension age (see PTM062200), or they meet the ill-health condition (see PTM062100). For payments made before 6 April 2015 the member must have reached age 60;
  • It is paid in connection with a scheme-specific pension commencement lump sum and no later than one month after that lump sum is paid;
  • The member has available lifetime allowance when the lump sum is paid.  As the scheme-specific pension commencement lump sum will crystallise before the trivial lump sum, this means the member’s available lifetime allowance needs to be more than the amount of the connected pension commencement lump sum.  For a payment made after the member’s 75th birthday see Scheme-specific lump sum protection and the lifetime allowance for advice on calculating the available lifetime allowance;  
  • apart from any pension in payment before 6 April 2006, it extinguishes the member’s entitlement to benefit under the scheme. The reference to extinguishing the member’s entitlement to benefits means all the rights that could reasonably have been known about at the time of the payment. The lump sum will not cease to be an authorised payment purely because further entitlement is later created that could not have been known about at the time of the initial payment, for example, through a pay revision.  Where specifically identifiable contingent beneficiary’s benefits/rights exist, these too must be commuted with the member’s benefits; and
  • Since the payment of the scheme-specific pension commencement lump sum:

    • no contributions have been made to the scheme in respect of the member
    • no recognised transfer has been made into or out of the scheme in respect of the member, and
    • no annuity or scheme pension has been purchased by sums or assets held by the scheme for the benefit of the member

In some cases, where the conditions above cannot be met, an individual must be paid a pension commencement lump sum that is lower than the amount of their maximum scheme-specific lump sum, because part of their rights under the scheme must be paid as a pension if the lump sum is to meet the conditions for a pension commencement lump sum.

Example

Andy has a right to a scheme-specific lump sum of £100,000. The value of his total rights under his pension scheme is £102,000. On 1 June 2015, Andy has available lifetime allowance of £101,000. Andy’s pension scheme pays the whole of his rights to him as lump sums on 1 June 2015. £100,000 is paid as a scheme-specific lump sum and as a pension commencement lump sum it is not taxable. After paying the scheme-specific lump sum, Andy still has £1,000 available lifetime allowance. The remaining £2,000 can be (and is) paid to Andy as a trivial lump sum. The whole £2,000 is taxable and PAYE is applied to this trivial lump sum.

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Payment of a scheme-specific protected pension commencement lump sum with multiple pension types

Articles 23ZB and 23ZC The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572

The condition that the individual must become entitled to all their pension rights under the scheme in the same date, is modified where a single scheme-specific pension commencement lump sum is paid in connection with at least two following pension types from the scheme.

  • a scheme pension under a defined benefits arrangement
  • a scheme pension under a money purchase arrangement
  • a lifetime annuity

In such cases, the individual must become entitled to all of their pensions within six months of first becoming entitled to any type of pension under the pension scheme. The eighteen-month window for paying the pension commencement lump sum (see PTM063210) operates by reference to the date on which the member became entitled to the last of the pensions in connection with which it is paid.

Death before becoming entitled to all the pensions

Articles 23ZB, 23ZD and 23ZE The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572

This modified payment conditions period may still be satisfied if the member dies before becoming entitled to any or all of the connected pensions. The payment condition will be satisfied if the scheme administrator thinks the member would have become entitled to all of their pensions within six months of: :

  • the earliest pension entitlement date (where the member became entitled to at least one pension type
  • the earliest date on which the scheme administrator considers the member would have become entitled to any of the pensions (in a case where the member did not become entitled to any of the pensions before they died)

The eighteen-month window for paying the pension commencement lump sum is based on the assumption that entitlement to that lump sum arose on either

  • the latest date on which the member became entitled to a pension from the scheme(where entitlement to at least one pension arose) or
  • the earliest date on which the scheme administrator thinks the member would have become entitled to any of the pensions (where the member died without having become entitled to a pension).

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Calculating the maximum permitted pension commencement lump sum

Paragraph 34 Schedule 36 Finance Act 2004

The maximum scheme-specific pension commencement lump sum will be the amount of “VULSR” on 5 April 2006 increased by 20% for so long as the standard lifetime allowance does not exceed £1.8 million, plus an additional lump sum (ALSA).

The amount of a scheme specific pension commencement lump sum is currently found by using the following formula

(VULSR x ULA/FSLA) + ALSA

VULSR = the value of the individual’s uncrystallised lump sum rights under the scheme on 5 April 2006

ULA = is the greater of £1.8 million and the standard lifetime allowance when benefit entitlement arises

FSLA = £1.5 million.

ALSA is the amount found by the formula

[LS + AC - (VUR x CSLA/FSLA)]/4

LS = the amount of pension commencement lump sum actually paid

AC = the amount actually crystallised by becoming entitled to a pension in connection with which the pension commencement lump sum is paid, or the amount of the trivial lump sum paid in accordance with the conditions described earlier above.

Where a scheme pension is paid from a money purchase arrangement, AC will be the scheme pension purchase price, i.e. the value of the sums and assets made available to provide the scheme pension. Where the member becomes entitled to the connected pension after reaching age 75, although there is no actual benefit crystallisation event, AC is the amount that would have crystallised had there been such an event.

Where the member dies after payment of the scheme-specific pension commencement lump sum but before becoming entitled to any connected pension(s), AC is the value of the individual’s uncrystallised rights under the scheme on the date of the member’s death using the same basis on which the scheme administrator determined the amount of the lump sum to be paid.Where the member dies after payment of the scheme-specific pension commencement lump sum in connection with multiple pension types and after becoming entitled to at least one but not all the connected pensions, AC is the amount actually crystallised in respect of the pension(s) the member became entitled to before they died plus the value of the individual’s uncrystallised rights under the scheme on the date of the member’s death using the same basis on which the scheme administrator determined the amount of the lump sum to be paid

VUR = the value of the individual’s uncrystallised rights under the scheme on 5 April 2006.

CSLA = the current standard lifetime allowance.

FSLA = £1.5 million

PTM063140 explains how the value of VULSR and VUR is obtained.

If the formula for ALSA gives a negative result, ALSA will be nil.

Partial transfers reduce the amount of the lump sum

Articles 21 to 23 The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572

Where an individual makes a partial transfer out, the maximum amount of the protected pension commencement lump sum is reduced. This is done using the formula:

[VULSR x (ULA/FSLA)] + ALSA - TV/4

VULSR  = the value of the individual’s uncrystallised lump sum rights under the scheme on 5 April 200)

ULA = the greater of £1.8 million or the standard lifetime allowance when entitlement to the lump sum arises

FSLA = £1.5 million.

ALSA = the additional lump sum amount in respect of the increase in the value of benefits after 5 April 2006 (see above)

TV = the value of the sums and assets transferred out of the scheme after 5 April 2006.

Applying this formula results in the amount of the protected lump sum in the transferring scheme being lower than might have been the case had the transfer not taken place.  This is because one quarter of the transfer value is deducted as part of the calculation, and also because the figure taken into account for ALSA reflects the fact that the value of the member’s rights or benefits in the transferring scheme is lower than would have been the case had there been no transfer.

Where an individual’s right under a protected pension scheme are reduced due to the transfer out of a pension debit, the individual’s protected lump sum rights remain unchanged. This is because a transfer involves the moving of an individual’s accrued pension rights from one scheme to another of the responsibility to pay the member the benefits to which they are entitled, see PTM029000. A pension debit is the amount by which the value of the original member’s pension rights are reduced, with a corresponding pension credit by which the ex-spouse’s or former civil partner’s pension rights are increased. As the member has no right to benefits in relation to a pension credit, the transfer-out of a pension debit is not a transfer for pension tax purposes.

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How to pay protected lump sum benefits exceeding 25%: examples for money purchase arrangements

Paragraph 34 Schedule 36 Finance Act 2004

Example 1

Ruth had a protected lump sum right of £50,000 in a retirement benefit scheme on 5 April 2006. The value of her total rights under the scheme (the fund from which her benefits, including lump sum, will be provided) was £100,000 on 5 April 2006.

Ruth took her lump sum under the scheme in May 2015 when the standard lifetime allowance was £1.25 million and she did not have fixed protection at that time. At this point the value of her rights under the scheme had fallen to £80,000.

Ruth’s lump sum rights in May 2015 are in principle made up of two elements, the revalorised amount of the lump sum rights as at 5 April 2006 and the ALSA lump sum. In Ruth’s case the revalorised lump sum is:

£50,000 x (£1.8 million/£1.5 million) = £60,000

The amount of the ALSA is the minimum zero, calculated as

£80,000 - (£100,000 x £1.25 million/£1.5 million)/4

using the ALSA formula above.

So Ruth could be paid a pension commencement lump sum from the scheme of £60,000.

Example 2

The facts are the same as those for Example 1 above except that the value of Ruth’s rights under the scheme in May 2015 is £160,000.

The value of the revalorised amount of the lump sum rights as at 5 April 2006 is unchanged from Example 1 so the revalorised lump sum is £60,000.

However, the ALSA lump sum now has an actual value as Ruth’s scheme rights have increased by 60% whilst there is no increase in her standard lifetime allowance between 6 April 2006 and May 2015. The amount of the ALSA lump sum will be £19,167 calculated, using the ALSA formula above, as

£160,000 - (£100,000 x £1.25 million/£1.5 million)/4

So Ruth can be paid a pension commencement lump sum from the scheme of £79,167, being £60,000 (the revalorised 5 April 2006 lump sum rights) plus £19,167 (the ALSA lump sum).

Example 3

The facts are the same as those for Example 1 above except that Ruth applied for fixed protection by 5 April 2012 and this is still valid. For more detail about fixed protection - see PTM093100.

The value of the revalorised lump sum rights as at 5 April 2006 is unchanged from Example 1 and is £60,000.

Since Ruth has fixed protection, CSLA is replaced in the ALSA formula by her underpinned lifetime allowance of £1.8 million since this is greater than the standard lifetime allowance of £1.25 million for May 2015. The amount of the ALSA lump sum will be the minimum zero calculated as

£80,000 - (£100,000 x £1.8 million/£1.5 million)/4

So Ruth can be paid a pension commencement lump sum from the scheme of £60,000 (the revalorised 5 April 2006 lump sum rights).

Example 4

The facts are the same as those for Example 3 above except that the value of Ruth’s rights under the scheme in May 2015 is £160,000.

The value of the revalorised amount of the lump sum rights as at 5 April 2006 is unchanged from Example 1 so the revalorised lump sum is £60,000.

However, the ALSA lump sum now has an actual value as Ruth’s scheme rights have increased by 60% which exceeds the increase in her standard lifetime allowance between 6 April 2006 and May 2015. Using the ALSA formula, the amount of the ALSA lump sum is £10,000 calculated, as follows:

£160,000 - (£100,000 x £1.8 million/£1.5 million)/4.

So Ruth can be paid a pension commencement lump sum from the scheme of £70,000, being £60,000 (the revalorised 5 April 2006 lump sum rights) plus £10,000 (the ALSA lump sum). This compares to £79,167 if all the circumstances were the same but she had not taken fixed protection (see Example 2).

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How to pay protected lump sum benefits exceeding 25%: example where there is not enough available lifetime allowance

Peter has a proposed lump sum benefit of £50,000 under a registered pension scheme.

Peter is entitled to take this lump sum as a stand-alone lump sum - see heading below.

The lump sum is calculated on the basis of Peter’s protected lump sum rights in the scheme.

Immediately before taking benefits from this scheme, his available lifetime allowance is valued at £20,000. The maximum Peter can take as a pension commencement lump sum is £50,000. If he does, £20,000 of his pension commencement lump sum is free of income tax - but £30,000 is subject to the lifetime allowance charge of 55% - see PTM083000.

If, rather than to a stand-alone lump sum, Peter’s entitlement is to a 25%+ lump sum, he will also become entitled to a pension in connection with which the lump sum has been paid.

For lifetime allowance purposes, a pension commencement lump sum crystallises before the crystallisation of the connected pension - see PTM088200. So Peter can still take £20,000 of his pension commencement lump sum free of tax with the remainder subject to the lifetime allowance charge. The whole of the value of the connected pension Peter receives will also be subject to the lifetime allowance charge of 25% - see PTM083000. This pension will still count as a relevant pension.

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Stand-alone lump sums

Articles 25 to 25D The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572

A pension commencement lump sum must be paid in connection with becoming entitled to a pension from the same scheme. For this reason it is not possible for all of a member’s rights under the scheme to be paid as a pension commencement lump sum.

Where on 5 April 2006 an individual had the right to have all their scheme benefits paid as a tax-free lump sum, they can still get all their benefits paid as a tax-free lump sum if certain conditions are met. Where such a lump sum is paid, the lump sum is called a stand-alone lump sum.

A stand-alone lump sum can be paid from a scheme with scheme-specific protection of lump sums where:

  • the member has reached the normal minimum pension age (or any earlier protected pension age they may have under the scheme - see PTM062200) or is taking benefits earlier due to ill-health - see PTM062100,
  • the entitlement to the lump sum is a single benefit crystallisation event that crystallises all of the member’s rights under the scheme that had not crystallised before 6 April 2006,
  • there has been no relevant benefit accrual (see PTM092430) for the individual under the scheme after 5 April 2006,
  • the member did not have lump sum rights of more than £375,000 on 5 April 2006 where either primary or enhanced protection applies when the lump sum is paid (if the individual did have lump sum rights of more than £375,000 on 5 April 2006, see the guidance at PTM063110 for the circumstances in which a stand alone lump sum can be paid),
  • on 5 April 2006, all the member’s uncrystallised rights (calculated in accordance with PTM063140) under the scheme and any other scheme within paragraph 1(1) (a) - (e) Schedule 36 relating to the same employment could have been paid out as a tax-free lump sum, and
  • the total value of the member’s uncrystallised lump sum rights lump sum provided under all schemes within paragraph 1(1) (a) - (e) Schedule 36 relating to the same employment (calculated as per the previous bullet point) was not more than the maximum permitted lump sum as described in PTM063140 (description for non-statutory schemes).

Payment of a stand-alone lump sum is a benefit crystallisation event; it is a BCE 6. This means that all or part of the stand-alone lump sum is liable to the lifetime allowance charge if the individual does not have enhanced protection or enough available lifetime allowance to cover the payment - see PTM081000. Apart from this a stand-alone lump sum can be paid tax free, just like a pension commencement lump sum - see PTM063210.

Transfers

Transfers into or out of a registered pension scheme under which the member has the right to a stand-alone lump sum may cause the member to lose their right to a stand-alone lump sum. PTM063150 explains what transfers will cause the individual to lose their right to a stand-alone lump sum.

Amount of stand-alone lump sum

There is no set upper limit on the amount of stand-alone lump sum:

  • Other money purchase arrangements can pay a stand-alone lump sum that includes the full investment return on the value of the lump sum rights as at 5 April 2006. This can happen even though this is more than the 5 April 2006 value indexed in line with the standard lifetime allowance.
  • Defined benefits or cash balance arrangements can pay a stand-alone lump sum up to the appropriate limit. (PTM092430 explains what the appropriate limit is.)