HM Revenue & Customs (HMRC) updated its Pensions Tax Manual (PTM063200) on 24 September 2026 to provide detailed clarification on the calculation of ‘relevant accretions’ under the Finance Act 2004 provisions for taxing pension lump sums. ‘Relevant accretions’ represent the growth element of uncrystallised funds paid as an Uncrystallised Funds Pension Lump Sum (UFPLS) or serious ill-health lump sum, which is taxed at the individual’s marginal rate rather than the 25% tax-free lump sum allowance. The new guidance addresses complex scenarios including phased drawdown, partial transfers, and the interaction with the abolished Lifetime Allowance (replaced by the Lump Sum Allowance and Lump Sum and Death Benefit Allowance from April 2024).
Key Takeaways
- Valuation Timing Critical: The guidance confirms that relevant accretions are calculated by reference to the fund value immediately before each lump sum payment, not at the original crystallisation date, requiring scheme administrators to maintain granular transaction-level records.
- Transfer Interactions: Where funds are transferred between schemes after 5 April 2024, the receiving scheme must obtain a ‘transfer statement’ detailing the tax-free and taxable components to correctly compute future relevant accretions.
- Rectification Window: HMRC has opened a 12-month window (until 30 September 2027) for scheme administrators to correct past miscalculations without penalty, provided the error is self-reported and corrected via the Event Reporting system.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement