BCEs - Vestings Events

Vesting Events are the same as Benefit Crystallisation Events - BCEs (just a shorter name).

The types of BCE allowed are – ‘Lump sum, Pension Comm’, ‘Drawdown fund’, ‘Deemed BCE’, ‘Annuity from unvested’, ‘Annuity from Drawdown’, ‘Unvested DIS Lump Sum’, 'LTA Excess Lump sum, ‘Scheme pension’, 'BCE 5A', 'BCE 5A in TiD', 'BCE 5B', 'BCE 5C', 'BCE 5D' and ‘UFPLS’

There can only be 1 event per type per person per day.

The pension commencement lump sum must be a separate BCE from the fund designated for drawdown. If the lump sum were to be included in the same BCE as the drawdown BCE then the test at age 75 for the ‘final BCE’ would be more complicated. The lump sum and pension payments must go through the bank account as well as being recorded as BCEs.

Enter the amount of the Lifetime Allowance Charges (25% on pension and 55% on lump sum) as soon as the BCE takes place. The quarterly tax report will pick up all such payments. Only enter the date of payment of the tax after it has been paid. The LTA Excess Lump Sum is the amount actually paid to the member i.e. 45% of the total amount available and the 55% tax is on top. Double clicking the Tax at 55% will calculate the amount of tax for you – you may need to adjust the pence for rounding.

The ‘Comment’ box is limited to 40 characters – for longer notes use this box as a pointer to a notes file e.g. in a Word document.

External Schemes

BCEs in external schemes can be stored but the ‘BCE in external scheme?’ box must be ticked so that the software does not take the BCE into account when calculating the vested fund. Once that box has been ticked, a box will appear so that the name of the external scheme can be entered.

Only enter a scheme name if the BCE relates to a different scheme.

Deemed BCEs

A ‘Deemed BCE’ occurs just before the first actual BCE if there was a pension in payment at April 2006 – the details are entered on the Member Transition screen.

Where a member has more than one pension scheme, the legislation is not specific as to where that deemed BCE occurs. If a member had a pension in payment at A Day in one scheme (and no unvested funds in that scheme) then the administrator of that scheme will have no involvement in the future BCEs and might well not know anything at all about the other pension schemes of the member. It would therefore be difficult to argue that a deemed BCE would take place in that scheme.

The administrator of the scheme with the first BCE after A Day will have to be involved in the BCE and so it is reasonable to assume that the deemed BCE takes place in that scheme. If a member has pensions in payment from more than one pension scheme then a deemed BCE will still be considered to take place in the scheme with the first BCE from unvested funds.

Omni therefore works on the basis that all of the pre-2006 pensions in payment will be calculated at the date of the first actual BCE and will be added together and entered in the members, transition to 2006 screen. There will therefore only be one deemed BCE and it will be recorded as taking place in the scheme which has the first actual BCE after A Day.

If you say a Deemed BCE took place in an external scheme then Omni will ask you to check that this is actually correct.

Omni only allows one BCE of each type per scheme per day and so it does not allow separate deemed BCEs to be recorded on the same day, even if the logic could be constructed for that approach.

Pre A-day BCEs

BCEs can be stored with dates before 6^th April 2006, but the analysis software will ignore any such BCEs.

Other BCEs

The ‘Annuity from Drawdown’ BCE takes place when an annuity is bought with Drawdown funds. The ‘Amount Vested’ will be the difference between the value of the Drawdown fund used to buy the annuity and the amounts originally vested to provide those Drawdown funds – remember it is the difference not the actual fund value. Full process of BCE4.

‘Annuity from unvested’. If the annuity is bought directly from unvested funds then the total amount used to buy the annuity should be entered.

‘BCE 5A’ takes place at age 75 and relates to normal funds in drawdown. The ‘Amount Vested’ will be the difference between the value of the drawdown fund and the amounts originally vested to provide those drawdown funds – remember it is the difference not the actual fund value. The fund value on the 75^th birthday should be stored in the ‘Fund at age 75’ field – this value has to be stored for the Event Report after the end of each tax year. The process is similar to BCE4. Pre 2006 funds cannot have a BCE 5A.

‘BCE 5A in TiD’ relates to TiDs because the normal funds and TiD funds should be calculated and stored individually e.g. if there is a normal drawdown fund and 3 TiDs then there should be 4 records for BCE 5A at age 75. The full name of the TiD should be included in the Comments field e.g. TiD3.

It is recommended that the BCE 5A record is stored for each arrangement (even if no lifetime allowance is used up) so that there is a record of the BCE being processed to show it hasn’t been forgotten.

‘BCE 5B’ relates to uncrystallised funds remaining at age 75. There is a lifetime allowance test for such funds at age 75. The full amount of uncrystallised funds should be entered and the LTA used calculated in the normal way. Details of any LTA tax charge should be stored. This will record the LTA details but the funds have not then be crystallised. After age 75, when the member later decides to draw the lump sum, the 2 normal BCEs should be entered for the lump sum and the drawdown fund but there is no lifetime allowance test and so the LTA used and LTA charge should not be entered.

‘BCE 5C’ relates to uncrystallised funds remaining when a member dies before age 75 and the funds are designated for dependant’s flexi access drawdown.

‘BCE 5D’ relates to uncrystallised funds remaining when a member dies before age 75 and the funds are designated for a dependant’s annuity.

For both 5C and 5D, the fund should be moved from the deceased member to the dependant’s record by internal transfer as well as recording the BCE.

‘LTA %’ is the percentage of the Lifetime Allowance used by each BCE. When the field is blank, double click the edit box for the percentage to be calculated automatically – it is rounded down to 2 decimal places. The ‘LTA %’ in the grid cannot be entered (so that it can be calculated in the edit box).

The BCE Workings can be stored (double click on the box to enlarge and then, after entering the data, double click to reduce the box). The workings have to be provided on the certificate that is sent to the member within 3 months of the BCE.

BCE 5A Analysis

The BCE5A button produces an Excel sheet with all the information needed to calculate the amount of a BCE5A at age 75. For each BCE, it shows the amount that was originally allocated to the drawdown fund and compares this with the current value of the drawdown fund to see whether there has been any increase. The normal drawdown fund and any transfers in drawdown are analysed separately. The lifetime allowance previously used and the amount remaining is shown and then the amount of the lifetime allowance used up by this BCE is calculated and any taxable amount shown.

Age 75 Checks

When a member reaches age 75, it is important to deal with the BCE5A and BCE5B checks. Once these have been done, there is a tick box to record that the checks have been done, even if a BCE has not been recorded.