the benefits must be paid from the scheme in which the rights were held on 5 April 2006 (the original scheme) or a registered pension scheme to which the rights were transferred as part of a block transfer after 5 April 2006;
the uncrystallised lump sum rights in the original scheme on 5 April 2006 were more than 25 per cent of the value of the uncrystallised pension rights in the scheme on that date; and
the member must become entitled to all their pension and lump sum rights (that were not in payment on 5 April 2006) under the scheme on the same day.
Protected PCLS in practice
The maximum PCLS a client with scheme specific protection is entitled to is -
- the monetary amount the member was entitled to at A-Day, revalued in line with changes in the lifetime allowance since that date (‘LS’)
PLUS
- an additional lump sum amount (‘ALSA’) which is broadly equivalent to 25 per cent of the fund growth, contributions and transfers-in since A-Day.
Where:
LS = £ tax free cash at A-day x 120 per cent*
ALSA =[£ total fund value - (A-day fund value x standard LTA / £1.5m)] x 25 per cent
Having calculated the protected lump sum, you calculate the additional lump sum amount. The two are then added together.
Notes
*This uplift will be 120 per cent until such time the standard lifetime allowance rises above £1,800,000.
Interaction with fixed and individual protection
A member with a scheme-specific protected lump sum may have subsequently applied for one of the types of fixed or individual protection. There is a slight quirk in the calculation for these members.
The A-Day lump sum is calculated in the same manner as outlined above. However, the additional lump sum amount calculation uses the protected lifetime allowance rather than the current standard lifetime allowance. This can result in the member receiving a lower PCLS than they would have done without the additional fixed or individual protection.
Block transfers
Rights that benefit from scheme-specific protection are – as the name suggests – specific to the pension scheme where the rights were accrued and are usually lost on transfer. However, if a ‘block transfer’ (sometimes also known as a ‘buddy transfer’) is made, then the rights can be carried across to the new scheme.
There are three conditions for a transfer to be a block transfer. All three must be satisfied for the protection to be retained.
