Relevant Benefit Crystallisation Events
When coming to drawdown your pension, the scheme administrator will run a relevant benefit crystallisation event (RBCE). Here we explore this complex area and how it works in practice.
Following recent press speculation, we are experiencing a high volume of requests from our clients to draw benefits from their SIPP or SSAS. As always, we will strive to facilitate your requests as soon as possible, however, given these unprecedented volumes we kindly ask that all requests are received by us, in full, prior to 16th October 2024 to provide adequate time for processing.*
*In order to calculate and pay benefits we may be required to obtain information from third party companies. Dentons cannot be held responsible for their delays in providing the information we require. In addition, if you hold commercial property within your pension scheme, a formal valuation may be required.
Relevant Benefit Crystallisation Events were introduced from 6 April 2024 as part of the abolition of the lifetime allowance.
What is a Relevant Benefit Crystallisation Event?
Pensions legislation specifies the occasions when a Scheme Administrator must check whether a lump sum being paid to a member exceeds that member’s available lump sum allowance or lump sum and death benefit allowance. These occasions are known as relevant benefit crystallisation events. Any lump sum that has been paid prior to the 6 April 2024 is not an RBCE.
RBCEs are lump sum payments defined as follows:
- ‘relevant lump sums’ – payments made in the individual’s lifetime
- ‘relevant lump sum death benefits‘– payments made after the member has died
At each RBCE the lump sum payments are assessed against the individual’s available LSA and/or LSDBA to determine what amount of the lump sum may be paid tax-free.
Only lump sum payments are tested against the lump sum allowance (LSA) and lump sum and death benefit allowance (LSDBA) limits. Pension income payments are not tested against these - during the member’s lifetime or following their death.
The lump sums that are tested against the LSA and LSDBA include:
- Pension commencement lump sums (PCLS)
- Standalone lump sums (the tax-free value that could have been paid on 5 April 2023)
- Tax-free elements of uncrystallised funds pension lump sums (UFPLS)
- Serious ill health lump sums (tax-free element tested against the individual’s LSDBA only)
The lump sum death benefits that are tested against the LSDBA include:
- Defined Benefit Lump Sum Death Benefits
- Annuity Protection Lump Sum Death Benefits
- Pension Protection Lump Sum Death Benefits
- Drawdown/Flexi-access Drawdown Lump Sum Death Benefits
- Dependant, Nominee or Successors Flexi-access Drawdown Lump Sum Death Benefits
Lump sum death benefits paid from funds crystallised prior to 6 April 2024 are not tested against the LSDBA.