Protection from the lifetime allowance charge: lifetime allowance enhancement factors: The non-residence factor for other money purchase arrangements
How to calculate the non-residence factor for an other money purchase arrangement
Sections 222(6) and (7) Finance Act 2004
For each part of an active membership period (see PTM095310) during which the individual is a relevant overseas individual (see PTM095310), the other money purchase arrangement non-residence factor is calculated in the following way.
Establish the total amount of contributions made by or in respect of the individual to the other money purchase arrangement between the dates determined as follows:
the latest of the following dates:
- the date when the individual became a relevant overseas individual
- the date when benefits first began to accrue to or in respect of the individual under the other money purchase arrangement, and
- 6 April 2006.
the earliest of the following dates:
- immediately before the benefit crystallisation event,
- the date when the individual ceased to be a relevant overseas individual, and
- the date when benefits ceased to accrue to or in respect of the individual under the other money purchase arrangement.
Express the resulting amount as a factor of the standard lifetime allowance as at the date under the second set of bullets above. The factor should go to two decimal places. This should be a rounded-up figure, so for example if the calculation produces a factor of 0.231 this becomes 0.24.
If there was an earlier part of the active membership period relating to the arrangement during which the individual was a relevant overseas individual the two factors for the two part-periods should be aggregated.
Example of calculating the non-residence factor for an other money purchase arrangement
Marilyn began to accrue benefits under her other money purchase arrangement on 6 January 2006. She was seconded to work overseas on 6 November 2006 and so became a relevant overseas individual on 6 April 2007.
Marilyn returned to work in the UK on 6 May 2010 and so ceased to be a relevant overseas individual on 5 April 2010. That was before a benefit crystallisation event and before she ceased to accrue benefits under the other money purchase arrangement.
The total contributions made by and in respect of Marilyn between 6 April 2007 and 5 April 2010 amounted to £175,000.
The other money purchase arrangement non-residence factor is therefore 0.1. This is calculated by dividing £175,000 by £1.75 million (the standard lifetime allowance for the 2009-2010 tax year).
£175,000/£1.75 million = 0.1