PTM175250 - Lump sum allowance and lump sum and death benefit allowance: Enhancement factors: Overseas transfer factor: Relevant relievable amount for a defined benefits arrangement

As of 6 April 2024 there is no longer lifetime allowance. If you are looking for information about protections, enhancement factors and the lifetime allowance charge please see these pages on The National Archives. If you are looking for information about the principles of lifetime allowance and benefit crystallisation events please see these pages of The National Archives.

If you are looking for information about enhancement factors pre-April 2024 please see The National Archive.  The below guidance applies for individual’s seeking an enhancement factor from 6 April 2024 to 5 April 2025.

How to calculate the relevant relievable amount for a hybrid arrangement 

Paragraph 20G(5)-(7) Schedule 36 Finance Act 2004

A hybrid arrangement is an arrangement that may, at any one time, provide one of four types of benefits in the form of cash balance benefits, other money purchase benefits, collective money purchase benefits, or defined benefits. There are effectively four potential outcomes but they are mutually exclusive, so benefits are provided in only one of those ways. They should not be confused with schemes with multiple arrangements where benefits accrue separately under different types of arrangement within a single recognised overseas pension scheme.

An example of a hybrid arrangement is one which, on the member’s retirement, will provide benefits calculated by reference to a pot of money available to that member, but subject to an underlying defined benefit promise calculated by reference to the member’s final salary and length of service. Should the pot of money available provide less than the underlying defined benefit promise the benefits provided will be augmented up to the level promised. Alternatively, if the pot of money provides a greater level of benefits than the underlying defined benefit promise, the individual would receive the money purchase benefits up to the level that the pot of money will provide. So, the benefits will be either money purchase benefits or defined benefits, but not both.

Where the individual’s arrangement under their recognised overseas pension scheme is a hybrid arrangement, the hybrid arrangement relevant relievable amount is established as follows.:

  1. If the benefits that may ultimately be provided under the arrangement may be cash balance benefits, calculate what would be the cash balance relevant relievable amount as set out in PTM175220 if the recognised overseas pension scheme were a cash balance arrangement.
  2. If the benefits that may ultimately be provided under the arrangement may be collective money purchase benefits, calculate what would be the collective money purchase relievable amount as set out in PTM175230 under the other money purchase arrangement.
  3. If the benefits that may ultimately be provided under the arrangement may be other money purchase benefits, calculate what would be the other money purchase relevant relievable amount as set out in PTM175230 if the recognised overseas pension scheme were an other money purchase arrangement other than a cash balance or collective money purchase arrangement.
  4. If the benefits that may ultimately be provided under the arrangement may be defined benefits, calculate what would be the defined benefits relevant relievable amount as set out in PTM175240 if the recognised overseas pension scheme were a defined benefits arrangement.
  5. Select the greatest relevant relievable amount from whichever of 1, 2, 3 or 4 above are relevant.

Example of calculating the relevant relievable amount for a hybrid arrangement 

Natalie’s hybrid arrangement can provide either cash balance benefits, other money purchase benefits, collective money purchase benefits or defined benefits.

Natalie’s potential cash balance relevant relievable amount is £50,000, her potential other money purchase relevant relievable amount is £16,000, her potential collective money purchase relevant relievable amount is £16,000, and her potential defined benefits relevant relievable amount is £100,000.

Natalie’s hybrid arrangement relevant relievable amount is therefore £100,000.