Relevant Benefit Crystallisation Events (RBCEs)

What are Relevant Benefit Crystallisation Events (RBCEs)? 

Under the pre 6th April 2024 LTA regime most lump sum payments and most provision of relevant pensions were known as Benefit Crystallisation Events. 

There were 13 BCEs and each time there was an event this would use up lifetime allowance. For example if you took £750,000 worth of benefits when the LTA was £1.5m then you would use up 50% of your LTA. At the next BCE you would have 50% of whatever the LTA was at that time remaining for further benefits before there was a tax charge.

The fundamental difference with the post abolition pension benefits regime under the LSA and LSDBA is that only lump payments will be tested against limits. There is no testing of pension benefits like drawdown, scheme pensions and annuities.

All RBCEs are lump sum payments:

• "relevant lump sums" - payments made in the individuals lifetime
• "relevant lump sum death benefits" - payments made after the member has died

Small lump sums such as small pots and triviality payments and pension commencement excess lump sums are not RBCEs.

At each RBCE the lump sum payments are assessed against the individuals available LSA and/or LSDBA to determine what amount of the lump sum may be paid tax free. 

Where multiple RBCEs happen on the same day the individual can decide the order they are paid in. Where the RBCE is on death the personal representatives decide what order they are paid  in. 

There is no prescribed method for a scheme to test RBCEs against the individuals allowances, each scheme determines their own procedures on how they ensure the benefits they pay are correct.

What are relevant lump sums?

These are:

• Pension Commencement Lump Sums
• Standalone Lump Sums 
• Uncrystallised Funds Pension Lump Sums 
• Serious Ill Health Lump Sums

All these lump sums are tested against the LSDBA.

The first three are also tested against the LSA.

What are relevant lump sum death benefits?

These are:

• Defined Benefit Lump Sum Death Benefits
• Annuity Protection Lump Sum Deaths
• Pension Protection Lump Sum Death Benefits
• Drawdown/Flexi-access Drawdown Lump Sum Death Benefits                  
• Dependant, Nominee or Successors Flexi-access Drawdown Lump Sum Death Benefis
• Charity Lump Sum Death Benefits
• Trivial Commutation Lump Sum Death Benefits

The last two benefits are not tested against the LSDBA.

A lump sum paid from rights that crystallised prior to 6^th April 2024 is not an RBCE.