Calculate Enhanced Lifetime Allowance if Worked Overseas
Published / Last Updated on 17/10/2019
Calculation of International Enhanced Lifetime Allowance for Defined Contribution Pension Schemes and Defined Benefit Schemes.
Calculation of International Enhanced Lifetime Allowance for Defined Contribution Pension Schemes:
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.
Calculation of International Enhanced Lifetime Allowance for Defined Benefit Schemes:
1 - multiply the individual’s pension entitlement under the defined benefits arrangement as at the latest of the following dates by the relevant valuation factor of 20 or a factor greater than 20 as agreed by HMRC
- 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 defined benefits arrangement, and
- 6 April 2006.
Where the registered pension scheme rules provide for a separate lump sum that is not a commutation of pension it is necessary to take that into account as well. That is done by adding to the amount resulting from the above calculation the separate lump sum entitlement that the individual has under the defined benefits arrangement as at the latest date above. This only applies if the lump sum entitlement is not linked to the individual’s pension entitlement so that their prospective pension entitlement is not reduced as a result of taking the lump sum.
2 - multiply the individual’s pension entitlement under the defined benefits arrangement as at the earliest of the following dates by the relevant valuation factor of 20 (or a factor greater than 20 as agreed by HMRC):
- 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 defined benefits arrangement.
Where the registered pension scheme rules provide for a separate lump sum that is not a commutation of pension it is necessary to take that into account as well. That is done by adding to the amount resulting from the above calculation the separate lump sum entitlement that the individual has under the defined benefits arrangement as at the earliest date above. This only applies if the lump sum entitlement is not linked to the individual’s pension entitlement so that their prospective pension entitlement is not reduced as a result of taking the lump sum.
3 - deduct the result of 1 from the result of 2.
4 - express the resulting amount as a factor of the standard lifetime allowance as at the date in 2. The factor should go to two decimal places. This should be a rounded-up figure, so for example if the calculation provides 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.
The individual’s pension entitlement under the defined benefits arrangement is the annual rate of pension which would be payable to or in respect of the individual if they became entitled to payment of it at the applicable date (as determined under 1 or 2 above). The individual’s lump sum entitlement under the defined benefits arrangement is the amount of lump sum which would be payable to or in respect of the individual if they became entitled to payment of it at the applicable date.
