Pre-commencement Pension and LSA

Hi, Can I check the position with regard to a pre-commencement pension and the new Lump Sum Allowance and the transitional tax-free amount certificate. If having taken benefits before April 2006 but having not had a benefit crystallisation event (BCE) between April 2006 and April 2024. Can you confirm how these benefits are to be treated and also what the impact will be if a BCE is created before April 2024? From reading it would appear the following: 1. No BCE between April 2006 and April 2024 Default position for previously used amount will be £0 as no previous BCE’s occurred/no LTA used Pre-commencements rights tested immediately before the Relevant BCE (RBCE) post April 2024. Calculation to determine the amount used is 25% of the pre-commencement value (25:1) immediately before the RBCE. It would appear the Transitional tax-free amount certificate will not be available given the (default) previously used amount is £0 and the ‘test’ occurs post April 2024? 2. BCE occurred between April 2006 and April 2024 Default position for previously used amount will be 25% of the Lifetime Allowance that has been used from BCE’s (as per other benefits) Transitional Tax-Free Amount Certificate should be available in this instance? The value for the certificate is confirmed to be ‘each pension commencement lump sum’ prior to April 2024. However, benefits taken prior to April 2006 weren't 'Pension Commencement Lump Sums' so does this mean the value for these benefits will be £0 for these pensions? Thanks

Hi chow123,
Please refer to guidance here:
Taking higher tax-free lump sums with lifetime allowance protection
Thank you. 

Thanks for getting back to me. I just have another question in relation to the following link and the transitional tax-free Amount certificate. PTM174300 - https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual/ptm174300 When detailing the values that need to be used under 'lump sum transitional tax-free amounts', it appears to duplicate the pre-2006 tax-free amount elements? This appears to suggest you need to add on 'any tax-free lump sums taken before 2006', followed by 'In addition, if the member had a pension in payment before 6 April 2006, 25% of the amount of the deemed BCE under paragraph 20 Schedule 36 FA 2004 that occurred immediately before the first BCE is included in the lump sum transitional tax-free amount. '. This would appear to be a duplication of the pre 2006 lump sum as you are including the actual amount received plus 25% of the BCE value? Could you confirm for me? I have detailed the full extract below: "Lump sum transitional tax-free amount The lump sum transitional tax-free amount is the total of the following amounts (if any) that the individual was entitled to prior to 6 April 2024:      - Pension commencement lump sums   - Uncrystallised funds pension lump sums    - Stand-alone lump sums   - Any tax-free lump sums taken before 6 April 2006     so far as no income tax charge has arisen in respect of these lump sums.   In addition, if the member had a pension in payment before 6 April 2006, 25% of the amount of the deemed BCE under paragraph 20 Schedule 36 FA 2004 that occurred immediately before the first BCE is included in the lump sum transitional tax-free amount.   The lump sum transitional tax-free amount is used to determine an individual’s available lump sum allowance, see PTM174100"

Hi,

For an answer to a detailed question of this nature, you would need to contact our Self Assessment team below.

Self Assessment: general enquiries

Thank you.