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HMRC internal manual

Pensions Tax Manual

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Information and administration: requirement for insurance companies to give the member a BCE statement

Glossary PTM000001
   

 

Regulations 16, 17 & 17A The Registered Pension Schemes (Provision of Information) Regulations 2006 - SI 2006/567

 

An insurance company must provide the member with a BCE statement if it is paying either a scheme pension or a lifetime annuity using funds derived from a registered pension scheme. The insurance company should have been given the information they need by the scheme administrator or where they are taking over responsibility from another insurance company from the old insurer - see PTM109000.

The BCE statement will show the percentage of standard lifetime allowance used up by various benefit crystallisation events (BCEs). The content of the BCE statement will vary depending on the nature of the funds used to provide the annuity or scheme pension.

PTM164400 provides guidance on how to calculate the percentage of standard lifetime allowance used up. Note that there are special rules for members with fixed protection, fixed protection 2014 , fixed protection 2016, individual protection 2014 and individual protection 2016. The percentage expressed on the statement should go to two decimal places (e.g. 25.55%). This should be a rounded down figure, so 25.558% becomes 25.55%.

There is no prescribed form for giving the annual BCE statement to the member. One option for providing the annual BCE statement to members is to include the figure on form P60 substitute - see PTM164400.

Scheme pension or lifetime annuity not provided from drawdown funds 
Part of a drawdown fund used to provide the scheme pension or lifetime annuity 
Whole drawdown fund used to provide the scheme pension or lifetime annuity

Scheme pension or lifetime annuity not provided from drawdown funds

The insurance company must give the member a BCE statement each year showing the percentage of standard lifetime allowance used up by:

  • the scheme pension or lifetime annuity, plus
  • any pension commencement lump sum paid in connection with the pension or annuity.

The requirement to provide an annual BCE statement ceases in the tax year following the tax year in which the member become 75. So if a member is 75 in 2014-15 that is the last tax year in which an annual BCE statement has to be provided.

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Part of a drawdown fund used to provide the scheme pension or lifetime annuity

The insurance company must give the member a BCE statement each year showing the percentage of standard lifetime allowance used up by the member becoming entitled to the scheme pension or lifetime annuity. If the amount of the BCE is nil the insurance company doesn’t need to provide a BCE statement. This may happen if, due to the overlap rules (see PTM088610), no amount arises on the current BCE 2 or BCE 4.

Where an annual statement is required the requirement stops from the tax year following the tax year in which the member become 75.

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Whole drawdown fund used to provide the scheme pension or lifetime annuity

The insurance company must give the member a BCE statement each year showing the total percentage of standard lifetime allowance used up by:

The total of all the following:

  • BCEs in respect of the member under the scheme that originally provided the funds to the extent that sums and assets representing those benefits have not been transferred to another registered pension scheme
  • where that scheme has received a transfer of crystallised rights the BCEs that occurred in respect of those transferred-in rights.
  • any BCE 3 that occurred in respect of a scheme pension provided by the insurance company

Less the total of the following:

  • any BCE that occurred when part of a drawdown pension fund or flexi-access drawdown fund was used to secure a lifetime annuity or scheme pension and the insurance company has been given details of the percentage of standard lifetime allowance used up by that event. (See PTM109000 the section ‘Funds derive from only part of a drawdown pension fund or flexi-access drawdown fund’.)
  • any BCE that has been subject to a statement under regulation 16(2). That is where an insurance company has been provided with sums and assets, that didn’t derive from a drawdown pension fund or flexi-access drawdown fund, to pay a scheme pension or lifetime annuity (See PTM109000 the section ‘Sums and assets do not come from a drawdown pension fund or flexi-access drawdown fund’.)
  • any BCE referable to sums and assets remaining within the pension scheme from which the drawdown funds in question were received.

The requirement to provide an annual BCE statement stops in the tax year following the tax year in which the member becomes 75.