The lifetime allowance and the lifetime allowance charge: benefit crystallisation events: each of the benefit crystallisation events (BCEs) in detail: BCE 8 transfer to QROPS
Section 216(1)-BCE 8 Finance Act 2004
Paragraphs 2 and 17 Schedule 32 Finance Act 2004
Article 29 The Taxation of Pension Schemes (Transitional Provisions) Order 2006 - SI 2006/572
See PTM088100 for an overview of the benefit crystallisation events (BCEs) and the lifetime allowance.
Transfer to a qualifying recognised overseas pension scheme
A BCE 8 occurs when a member, before they reach age 75, transfers funds from a registered pension scheme to a qualifying recognised overseas pension scheme (QROPS). This means that the values of transfers overseas from all types of arrangement are tested against the lifetime allowance.
See PTM102000 for more information on the transfer of benefits overseas.
Effective date of event
The effective date of the event is the date the assets/funds leave the scheme (not when they are received overseas).
The date a transfer can be said to leave a scheme is a legal question. It will be the point when a clear agreement is in place (including the completion of any transfer application and acceptance process) such that both schemes accept that the beneficial or equitable interest under the registered pension scheme has been transferred.
The fact that the conveyance of any legal title to any assets being transferred may stray does not alter the above. This follows an understanding of law that it is not necessary to complete the formalities of transferring the legal title to an asset to convey the underlying beneficial interest. As a test of effectiveness, it should be considered whether, had the member died on a particular date, death benefits would have been payable from the transferring registered pension scheme.
The amount crystallising at the BCE is the total of:
- any money transferred from the scheme, and
- the market value of any assets similarly transferred.
Where a chargeable amount arises, any lifetime allowance charge paid by the scheme administrator effectively forms part of that chargeable amount. The amount crystallising through BCE 8 will be the actual amount paid as a transfer value, for instance less any deduction made by the scheme administrator to cover any lifetime allowance charge due.
The chargeable amount will be what crystallises (net) through BCE 8 (and any other BCE), over and above the member’s available lifetime allowance, plus the charge paid by the scheme administrator. PTM085000 explains why this is and gives more detail.
Transfer of assets used to secure the entitlement to a drawdown pension that arose before 6 April 2006
There will be no BCE 8 in respect of so much of the transfer from a drawdown pension fund that represents unsecured pension in payment on 5 April 2006 - see PTM088300.
Prevention of double-counting
Section 169(1B) to (1E) and paragraph 17 Schedule 32 Finance Act 2004
The Registered Pension Schemes (Transfer of Sums and Assets) Regulations 2006 - SI 2006/499
Unlike for a transfer of crystallised rights from a registered pension scheme to another registered pension scheme, where no further BCE occurs, a transfer to a QROPS will produce further BCE i.e. a BCE 8 and so a further test against the lifetime allowance is undertaken.
Where a BCE 1 for a drawdown pension or a BCE 2 for a scheme pension may have applied at the time of the original entitlement to benefits, overlap provisions will apply. This will have the effect that the amount crystallised (or an appropriate proportion) under the original BCE 1 or 2 will be deducted from the amount crystallised under the BCE 8 occurring on transfer.
Process of testing for the lifetime allowance for BCE 8
Section 215, 218, 219 and 220 Finance Act 2004
Regulation 3 - ‘reportable event 9’, The Registered Pension Schemes (Provision of Information) Regulations 2006 - SI 2006/567
The process the scheme administrator follows here is exactly the same as where any form of authorised benefit is paid out, i.e. as with BCEs 1 to 6.
Any chargeable amount identified will be treated as a retained amount, with the lifetime allowance charge becoming due at the rate of 25 per cent. This is because even though the amount/assets transferred are paid out of the scheme they are not paid ‘to the individual’. See PTM085000 for a further explanation on the rate of lifetime allowance charge imposed here.
The scheme administrator is also obliged to report the transfer to HMRC - see PTM161000.