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Scheme Specific Tax Free Cash in Defined Benefits schemes

PKO7375PKO7375 Member
in Technical stuff
Hello! A bit of a technical conundrum for a Friday... I have a client with scheme specific tax free cash in a defined benefit scheme. I'm familiar with the calculation for a DC scheme but I think it is way more complicated for DB schemes, and depends on the commutation factor. Anyone ever done this type of calculation before? I have the protected LS and pension at A-Day, pension at NRD and commutation factor. All the resources online refer to DC SSTFC calculations... My second question relates to the fact that the member has IP14 an LTA of £1.5m. Is his maximum tax free cash based on the lower of 25% £1.5m (£375k) or the scheme specific TFC? If SSTFC takes precedence, is the a lump sum LTA charge of 55% on the excess over £375k? Any help gratefully appreciate! Thanks Pippa
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Comments

  • benjaminfabibenjaminfabi Moderator
    Hi Pippa,

    What are your numbers for the first part of the question?

    Second part, scheme specific protection was automatically given and only available to members who, on 5 April 2006, had lump sum rights of >25% of the value of accrued benefits AND where the TFC was less than £375k.

    At the point of crystallisation it is possible to have a PCLS of >25% of the accrued benefits but NOT of more than 25% of the member's LTA (in your client's case, £375k through IP14). This limit includes PCLS from all pension schemes. The DB scheme should not pay PCLS of more than £375k, with any LTA charge being made against the value of excess income.

    I hope that makes sense.
    Benjamin Fabi 
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