Finance (No. 3) Bill (HC Bill 200)

Finance (No. 3) BillPage 270

73 (1) In section 216 (benefit crystallisation events and amounts crystallised), the
table in subsection (1) is amended as follows.

(2) In the entry for benefit crystallisation event 1, for “unsecured pension”
substitute “drawdown pension”.

(3) 5In the entry for benefit crystallisation event 5A—

(a) for “unsecured pension” substitute “drawdown pension”;

(b) for “individual’s unsecured pension fund” substitute “individual’s
drawdown pension fund”.

74 In section 241(1) (scheme chargeable payment), omit paragraph (aa) (and the
10“and” after it).

75 In section 268 (unauthorised payments surcharge and scheme sanction
charge), in subsection (6), omit—

(a) “172BA,”, and

(b) “or arises under section 181A”.

76 15In section 273A (insurance company liable as scheme administrator), in
subsection (1), for paragraph (c) substitute—

(c) a drawdown pension fund lump sum death benefit,.

77 (1) Section 280(2) (general index) is amended as follows.

(2) Omit the entries relating to “dependant’s alternatively secured pension
20fund” and “member’s alternatively secured pension fund”.

(3) Omit the entries relating to “dependant’s unsecured pension fund” and
“member’s unsecured pension fund” and at the appropriate place insert—

dependant’s drawdown
pension fund
paragraph 22 of
Schedule 28”;
“member’s drawdown
pension fund
25paragraph 8 of Schedule
28.

(4) At the appropriate place insert—

serious ill-health lump sum
charge
section 205A(1).

(5) 30Omit the entry relating to “unsecured pension fund lump sum death
benefit” and at the appropriate place insert—

drawdown pension fund
lump sum death benefit
paragraph 17 of Schedule
29.

78 In Schedule 28 (pension rules), omit the following provisions—

(a) 35paragraph 5 (meaning of “alternatively secured pension”);

(b) paragraphs 11 to 13 (member’s alternatively secured pension fund
etc);

Finance (No. 3) BillPage 271

(c) paragraph 19 (meaning of “dependants’ alternatively secured
pension”);

(d) paragraphs 25 to 27 (dependant’s alternatively secured pension fund
etc).

79 (1) 5Schedule 29 (authorised lump sums) is amended as follows.

(2) In paragraph 1 (pension commencement lump sum), in sub-paragraph
(3)(b), omit “, otherwise than by virtue of the operation of paragraph 8(2) of
Schedule 28,”.

(3) In paragraph 3 (pension commencement lump sum: calculation of
10applicable amount)—

(a) in sub-paragraph (1)(a), for “unsecured pension” substitute
“drawdown pension”;

(b) in sub-paragraph (5)(a), for “member’s unsecured pension fund”
substitute “member’s drawdown pension fund”;

(c) 15in sub-paragraph (8)(a), for “member’s unsecured pension fund”
substitute “member’s drawdown pension fund”.

(4) In paragraph 15 (uncrystallised funds lump sum death benefit), in sub-
paragraph (2)(b), for “unsecured pension” substitute “drawdown pension”.

80 (1) Schedule 32 (benefit crystallisation events: supplementary) is amended as
20follows.

(2) In paragraph 3 (benefit crystallisation events 1 and 2: prevention of
overlap)—

(a) in sub-paragraph (1), for “unsecured pension fund” substitute
“drawdown pension fund”;

(b) 25in sub-paragraph (2), for “unsecured pension” substitute
“drawdown pension”.

(3) In paragraph 4 (benefit crystallisation events 1 and 4: prevention of
overlap)—

(a) in sub-paragraph (1), for “unsecured pension fund” substitute
30“drawdown pension fund”;

(b) in sub-paragraph (2), for “unsecured pension” substitute
“drawdown pension”.

(4) In paragraph 5 (benefit crystallisation events 1 and 5: hybrid arrangements),
in sub-paragraph (2), omit the words from “(with the effect that” to the end.

(5) 35In paragraph 17 (benefit crystallisation event 8: prevention of overlap with
other events), in sub-paragraph (2)—

(a) for “unsecured pension fund” substitute “drawdown pension fund”;

(b) for “unsecured pension” substitute “drawdown pension”.

81 (1) Schedule 34 (non-UK schemes: application of certain charges) is amended as
40follows.

(2) In paragraph 1(3) (member payment charges), after paragraph (c) insert—

(ca) the serious ill-health lump sum charge,.

(3) After paragraph 4 insert—

4A (1) For the purposes of determining whether a person meets the
45flexible drawdown conditions in section 165(3A) or 167(2A)—

Finance (No. 3) BillPage 272

(a) any reference in paragraph 14A or 24C of Schedule 28
(minimum income requirement) to payments made to or in
respect of a member of a registered pension scheme
includes a reference to payments made to or in respect of a
5relieved member or transfer member of a relevant non-UK
scheme,

(b) any tax-relieved contributions made under a relevant non-
UK scheme by or on behalf of, or in respect of, a member of
the scheme are to be treated as if they were relevant
10contributions paid under a registered pension scheme,

(c) any tax-exempt provision made under a relevant non-UK
scheme in relation to a member of the scheme is to be
treated as if it was a relevant contribution paid under a
registered pension scheme, and

(d) 15a person who is an active member of a relevant non-UK
scheme is to be treated as if the person were an active
member of a registered pension scheme.

(2) In this paragraph—

  • “relevant contributions” has the meaning given by paragraph
    2014D or 24F of Schedule 28;

  • “tax-exempt contributions” and “tax-exempt provision” have
    the same meaning as in paragraph 3 of this Schedule.

(4) In paragraph 5—

(a) for “Sections 205 and 206” substitute “Sections 205 to 206”;

(b) 25after “short service refund lump sum charge” insert “, serious ill-
health lump sum charge”.

(5) Omit paragraph 7ZA (unauthorised payment charge: alternatively secured
pension etc).

82 (1) Schedule 36 (transitional provisions and savings) is amended as follows.

(2) 30In paragraph 20 (amount of lifetime allowance available to person who had
right to payment of pension on 5 April 2006), for sub-paragraph (4)
substitute—

(4) In the case of drawdown pension, ARP is—

(a) the maximum amount that may be paid in the drawdown
35pension year in which the time falls in accordance with
pension rule 5 (see section 165), or

(b) in the case of an arrangement to which subsection (3A) of
section 165 applies, the maximum amount that could have
been paid in accordance with that rule in the drawdown
40pension year in which that subsection first applied to the
arrangement if it had not so applied.

(3) In paragraph 28 (lump sum rights for members with enhanced protection),
in sub-paragraph (3), for “sub-paragraphs (5) to (7)” substitute “sub-
paragraphs (5) to (7A)”.

(4) 45In paragraph 29 (lump sum rights for members with enhanced protection)—

(a) in sub-paragraph (2), in the text treated as substituted for sub-
paragraphs (1) to (3) of paragraph 3 of Schedule 29, for “unsecured
pension” (in both places) substitute “drawdown pension”;

Finance (No. 3) BillPage 273

(b) in sub-paragraph (3), in the text treated as substituted for sub-
paragraphs (5) to (7A) of that paragraph—

(i) for “member’s unsecured pension fund” substitute
“member’s drawdown pension fund”, and

(ii) 5for the definition of “AC” substitute—

  • AC is—

    (a)

    in a case where the member becomes entitled
    to the pension before reaching the age of 75,
    the amount crystallised by reason of the
    10member becoming entitled to the pension,
    and

    (b)

    in a case where the member becomes entitled
    to the pension after reaching that age, the
    amount that would have been so crystallised
    15but for paragraph 2 of Schedule 32.

(5) In paragraph 34 (entitlement to lump sums exceeding 25% of uncrystallised
rights), in sub-paragraph (2), in the text treated as substituted for sub-
paragraphs (5) to (8) of paragraph 2 of Schedule 29, for the definition of “AC”
substitute—

  • 20AC is—

    (a)

    in a case where the member becomes entitled to the
    pension in connection with which the lump sum is
    paid before reaching the age of 75, the amount
    crystallised by reason of the member becoming
    25entitled to the pension, and

    (b)

    in a case where the member becomes entitled to that
    pension after reaching that age, the amount that
    would have been so crystallised but for paragraph 2
    of Schedule 32,

    30(but this is subject to sub-paragraphs (7AA) and (7B)),.

(6) In paragraph 36 (right to payment of lump sum death benefit)—

(a) in sub-paragraph (3)—

(i) after paragraph (a) insert “and”, and

(ii) omit paragraph (c) (and the “and” before it);

(b) 35omit sub-paragraphs (4) and (8);

(c) in sub-paragraph (9)—

(i) for “, annuity protection lump sum death benefit or
unsecured pension fund lump sum death benefit” substitute
“or annuity protection lump sum death benefit”, and

(ii) 40for “sub-paragraphs (3) to (8)” substitute “sub-paragraphs (3)
to (7)”;

(d) in sub-paragraph (10)(a), for “, annuity protection lump sum death
benefit or unsecured pension fund lump sum death benefit”
substitute “or annuity protection lump sum death benefit”;

(e) 45in sub-paragraph (11), in the definition of “TPLS”, for “, annuity
protection lump sum death benefit or unsecured pension fund lump
sum death benefit” substitute “or annuity protection lump sum
death benefit”.

Finance (No. 3) BillPage 274

Income Tax Act 2007

83 In section 30(1) of ITA 2007 (additional tax), after the entry relating to section
205 of FA 2004 insert—

  • section 205A of FA 2004 (pension schemes: the serious ill-
    5health lump sum charge),.

Consequential repeals

84 In consequence of the amendments made by this Schedule, omit the
following provisions—

(a) in Schedule 10 to FA 2005, paragraphs 18(4), 20, 23 and 25(3);

(b) 10in FA 2006—

(i) in Schedule 22, paragraphs 3 to 9, 10(3) and 12, and

(ii) in Schedule 23, paragraph 29;

(c) in FA 2007—

(i) in Schedule 19, paragraphs 2(3), 4, 11, 12(2) and (5), 13 to 15,
1516(2) to (4) and (6), 18(4), 20 to 26 and 29(2), (4) and (5), and

(ii) in Schedule 20, paragraphs 11(3) and 13;

(d) in FA 2008—

(i) in Schedule 4, paragraphs 4 and 9(2),

(ii) in Schedule 28, paragraphs 6 to 14, and

(iii) 20in Schedule 29, paragraph 16;

(e) in F(No.2)A 2010—

(i) section 6, and

(ii) Schedule 3.

Part 3 25Commencement and transitional provision

General

85 Subject to the provisions of this Part, the amendments made by this Schedule
have effect for the tax year 2011-12 and subsequent tax years.

Entitlement to unsecured or alternatively secured pension on 5 April 2011

86 30Any person who, immediately before 6 April 2011, was entitled to
unsecured pension or alternatively secured pension is to be treated, on and
after that date, as entitled to drawdown pension.

87 Paragraph 6 of Schedule 28 to FA 2004 (short-term annuity) has effect on and
after 6 April 2011 as if the reference to an annuity purchased by the
35application of sums or assets representing the whole or any part of the
member’s drawdown pension fund in respect of an arrangement included a
reference to an annuity purchased before that date by the application of
sums or assets representing the whole or any part of the member’s
unsecured pension fund in respect of the arrangement.

Finance (No. 3) BillPage 275

Member’s unsecured or alternatively secured pension fund existing on 5 April 2011

88 Paragraph 8(1A) of Schedule 28 to FA 2004 (member’s drawdown pension
fund) has effect on and after 6 April 2011 as if any reference to sums or assets
having been designated as available for the payment of drawdown pension
5included a reference to sums or assets having been designated, before that
date, as available for the payment of unsecured pension or alternatively
secured pension.

Current unsecured pension year to become drawdown pension year

89 (1) This paragraph applies in the case of a person who, immediately before 6
10April 2011, was entitled to unsecured pension.

(2) Where the last unsecured pension year began on or after 7 April 2010, the
reference in paragraph 9(1)(a) of Schedule 28 to FA 2004 (drawdown pension
year) to the day on which the member first becomes entitled to drawdown
pension is to be read as a reference to the day on which that unsecured
15pension year began.

(3) Accordingly, any unsecured pension year which began on or after 7 April
2010 is to be regarded, on and after 6 April 2011, as a drawdown pension
year.

(4) In this paragraph and paragraphs 90 and 91 “the last unsecured pension
20year” means the unsecured pension year in which 5 April 2011 fell.

Previous limit on amount of pension payable in year to apply for limited period

90 (1) This paragraph applies in the case of a person who, immediately before 6
April 2011—

(a) was entitled to unsecured pension, and

(b) 25had not reached the age of 75.

(2) Where, immediately before 6 April 2011, the last reference period to begin
before that date has not ended—

(a) pension rule 5 in section 165 of FA 2004 has effect in relation to every
drawdown pension year ending on or before the relevant date as if
30for “100%” there were substituted “120%”, and

(b) paragraph 10 of Schedule 28 to FA 2004 has effect with the following
modifications—

(i) the reference in sub-paragraph (1) to the first drawdown
pension year is to be read as a reference to the first drawdown
35pension year beginning after the relevant date;

(ii) any reference in sub-paragraphs (1ZA) to (1C) to a reference
period is to be read as including a reference to the current
reference period.

(3) The “relevant date” is the earlier of the following—

(a) 40the day on which the current reference period ends, and

(b) if a transfer within sub-paragraph (5) occurs in relation to the person,
the day on which the drawdown pension year in which the transfer
takes place ends.

Finance (No. 3) BillPage 276

(4) Subject to the operation of paragraph 10(1ZA) and (1B) of Schedule 28 to FA
2004, “the current reference period” is the period of 5 years beginning before
6 April 2011 and comprising—

(a) the drawdown pension year in which that date falls,

(b) 5any unsecured pension years which—

(i) began after the end of the last reference period ending before
that date, and

(ii) ended before that date,

and

(c) 10if the sum of the years falling within paragraphs (a) and (b) is less
than five, one or more drawdown pension years beginning after that
date.

(5) A transfer is within this sub-paragraph if—

(a) it takes place on or after 6 April 2011, and

(b) 15it is a recognised transfer for the purposes of Part 4 of FA 2004 (see
section 169 of that Act).

(6) For the purposes of pension rule 5 in section 165 of FA 2004, the amount
which, immediately before 6 April 2011, was by virtue of paragraph 10 of
Schedule 28 to FA 2004 the basis amount for the last unsecured pension year
20continues, on and after that date, to be the basis amount for every drawdown
pension year ending on or before the relevant date.

(7) Paragraph 10(4) of Schedule 28 to FA 2004 has effect for drawdown pension
years beginning on or after 6 April 2011 and ending on or before the relevant
date as it has effect for drawdown pension years falling within any reference
25period beginning after the relevant date, but as if—

(a) paragraph (a) were omitted,

(b) in paragraph (b), for “otherwise” there were substituted “if there has
been a recent annuity, recent additional fund designation or recent
pension sharing event”, and

(c) 30in paragraph 10(9) of that Schedule—

(i) the reference to the reference date were a reference to the day
on which the last unsecured pension year began, and

(ii) the reference to the immediately preceding drawdown
pension year included, in the case of a drawdown pension
35year beginning on 6 April 2011, a reference to the last
unsecured pension year.

(8) In paragraph 10(7) to (8A) of that Schedule any reference to drawdown
pension or the member’s drawdown pension fund is to be read as including,
in relation to anything occurring before 6 April 2011, a reference to
40unsecured pension or the member’s unsecured pension fund.

91 (1) This paragraph applies in the case of a person who—

(a) reached the age of 75 on or after 22 June 2010 and before 6 April 2011,
and

(b) immediately before 6 April 2011, was entitled to unsecured pension.

(2) 45Where the last unsecured pension year began on or after 7 April 2010—

(a) pension rule 5 in section 165 of FA 2004 has effect in relation to that
year as if for “100%” there were substituted “120%”, and

Finance (No. 3) BillPage 277

(b) for the purposes of that pension rule, the amount which,
immediately before 6 April 2011, was the basis amount for that year
by virtue of paragraph 10 of Schedule 28 to FA 2004 continues, on
and after that date, to be the basis amount for that year.

(3) 5The amendments made by paragraph 9 of this Schedule have effect in
relation to drawdown pension years beginning on or after 6 April 2011.

Drawdown pension year and basis amount where person’s whereabouts unknown at age 75

92 (1) This paragraph applies in the case of a person who—

(a) reached the age of 75 before 22 June 2010, and

(b) 10immediately before 6 April 2011, had a member’s unsecured pension
fund by virtue of paragraph 11(6) and (7) of Schedule 28 to FA 2004
(cases where member’s whereabouts are unknown at age 75).

(2) In a case where—

(a) the scheme administrator was unable to ascertain the person’s
15whereabouts during the relevant period, but

(b) the person’s whereabouts are ascertained by the scheme
administrator after the end of that period,

the reference in paragraph 9(1)(a) of Schedule 28 to FA 2004 (drawdown
pension year) to the day on which the member first becomes entitled to
20drawdown pension is to be read as a reference to the day on which the
person’s whereabouts are so ascertained.

(3) The “relevant period” is the period beginning with the person’s 75th
birthday and ending with 5 April 2011.

(4) In a case where the person’s whereabouts have been ascertained by the
25scheme administrator within the period of 6 months ending on 6 April 2011,
the reference in paragraph 9(1)(a) of that Schedule to the day on which the
member first becomes entitled to drawdown pension is to be read as a
reference to 6 April 2011.

Current alternatively secured pension year to become drawdown pension year

93 (1) 30This paragraph applies in the case of a person who, immediately before 6
April 2011, was entitled to alternatively secured pension.

(2) Where the last alternatively secured pension year began on or after 7 April
2010, the reference in paragraph 9(1)(a) of Schedule 28 to FA 2004
(drawdown pension year) to the day on which the member first becomes
35entitled to drawdown pension is to be read as a reference to the day on
which that alternatively secured pension year began.

(3) Accordingly, any alternatively secured pension year which began on or after
7 April 2010 is to be regarded, on and after 6 April 2011, as a drawdown
pension year.

(4) 40For the purposes of pension rule 5 in section 165 of FA 2004, the amount
which, immediately before 6 April 2011, was the basis amount for that
alternatively secured pension year by virtue of paragraph 13 of Schedule 28
to FA 2004 continues, on and after that date, to be the basis amount for that
year.

Finance (No. 3) BillPage 278

(5) In this paragraph “the last alternatively secured pension year” means the
alternatively secured pension year in which 5 April 2011 fell.

Entitlement to dependants’ unsecured or alternatively secured pension on 5 April 2011

94 Any person who, immediately before 6 April 2011, was entitled to
5dependants’ unsecured pension or dependants’ alternatively secured
pension is to be treated, on and after that date, as entitled to dependants’
drawdown pension.

95 Paragraph 20 of Schedule 28 to FA 2004 (short-term annuity) has effect on
and after 6 April 2011 as if the reference to an annuity purchased by the
10application of sums or assets representing the whole or any part of the
dependant’s drawdown pension fund in respect of an arrangement
included a reference to an annuity purchased before that date by the
application of sums or assets representing the whole or any part of the
dependant’s unsecured pension fund in respect of the arrangement.

15Dependant’s unsecured or alternatively secured pension fund existing on 5 April 2011

96 Paragraph 22(2) of Schedule 28 to FA 2004 (dependant’s drawdown pension
fund) has effect on and after 6 April 2011 as if any reference to sums or assets
having been designated as available for the payment of dependants’
drawdown pension included a reference to sums or assets having been
20designated, before that date, as available for the payment of dependants’
unsecured pension or dependants’ alternatively secured pension.

Current unsecured pension year to become drawdown pension year

97 (1) This paragraph applies in the case of a person who, immediately before 6
April 2011, was entitled to dependants’ unsecured pension.

(2) 25Where the last unsecured pension year began on or after 7 April 2010, the
reference in paragraph 23(1)(a) of Schedule 28 to FA 2004 (drawdown
pension year) to the day on which the dependant first becomes entitled to
dependants’ drawdown pension is to be read as a reference to the day on
which that unsecured pension year began.

(3) 30Accordingly, any unsecured pension year which began on or after 7 April
2010 is to be regarded, on and after 6 April 2011, as a drawdown pension
year.

(4) In this paragraph and paragraphs 98 and 99 “the last unsecured pension
year” means the unsecured pension year in which 5 April 2011 fell.

35Previous limit on amount of pension payable in year to apply for limited period

98 (1) This paragraph applies in the case of a person who, immediately before 6
April 2011—

(a) was entitled to dependants’ unsecured pension, and

(b) had not reached the age of 75.

(2) 40Where, immediately before 6 April 2011, the last reference period to begin
before that date has not ended—

Finance (No. 3) BillPage 279

(a) pension death benefit rule 4 in section 167 of FA 2004 has effect in
relation to every drawdown pension year ending on or before the
relevant date as if for “100%” there were substituted “120%”, and

(b) paragraph 24 of Schedule 28 to FA 2004 has effect with the following
5modifications—

(i) the reference in sub-paragraph (1) to the first drawdown
pension year is to be read as a reference to the first drawdown
pension year beginning after the relevant date;

(ii) any reference in sub-paragraphs (1ZA) to (1C) to a reference
10period is to be read as including a reference to the current
reference period.

(3) The “relevant date” is the earlier of the following—

(a) the day on which the current reference period ends, and

(b) if a transfer within sub-paragraph (5) occurs in relation to the person,
15the day on which the drawdown pension year in which the transfer
takes place ends.

(4) Subject to the operation of paragraph 24(1ZA) and (1B) of Schedule 28 to FA
2004, “the current reference period” is the period of 5 years beginning before
6 April 2011 and comprising—

(a) 20the drawdown pension year in which that date falls,

(b) any unsecured pension years that—

(i) began after the end of the last reference period ending before
that date, and

(ii) ended before that date,

25and

(c) if the sum of the years falling within paragraphs (a) and (b) is less
than five, one or more drawdown pension years beginning after that
date.

(5) A transfer is within this sub-paragraph if—

(a) 30it takes place on or after 6 April 2011, and

(b) it is a recognised transfer for the purposes of Part 4 of FA 2004 (see
section 169 of that Act).

(6) For the purposes of pension death benefit rule 4 in section 167 of FA 2004,
the amount which, immediately before 6 April 2011, was by virtue of
35paragraph 24 of Schedule 28 to FA 2004 the basis amount for the last
unsecured pension year continues, on and after that date, to be the basis
amount for every drawdown pension year ending on or before the relevant
date.

(7) Paragraph 24(4) of Schedule 28 to FA 2004 has effect for drawdown pension
40years beginning after 6 April 2011 and ending on or before the relevant date
as it has effect for drawdown pension years falling within any reference
period beginning after the relevant date, but as if—

(a) paragraph (a) were omitted,

(b) in paragraph (b), for “otherwise” there were substituted “if there has
45been a recent annuity, recent additional fund designation or recent
pension sharing event”, and

(c) in paragraph 24(9) of that Schedule—