House of Commons Public Bill Committee Proceedings

Session 2014 - 15
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Other Bills before Parliament

103

SUPPLEMENT TO THE VOTES AND PROCEEDINGS

Wednesday 2 July 2014

Report Stage Proceedings

Finance Bill, As Amended

NEW CLAUSES AND NEW SCHEDULES RELATING TO PENSIONS; AMENDMENTS TO

CLAUSES 39 TO 43; AMENDMENTS TO SCHEDULES 4 AND 5

Mr Chancellor of the Exchequer

Agreed to  NC13

To move the following Clause—

“Pension flexibility: further amendments

Schedule (Pension flexibility: further amendments) makes further provision in

connection with pension flexibility.”

Ed Balls

Chris Leslie

Cathy Jamieson

Catherine McKinnell

Shabana Mahmood

Negatived on division  NC9

To move the following Clause—

“Pension flexibility: Treasury analysis

(1)
The Chancellor of the Exchequer shall, within six months of this Act receiving

Royal Assent, publish and lay before the House of Commons any analysis

prepared by the Treasury prior to the publication of Budget 2014 relating to the

impact of changes made by sections 39 to 43 of this Act to schedules 28 and 29

to the Finance Act 2004.

(2)
The information published under subsection (1) must include—

(a)
any assessment made of the impact of the provision for independent face

to face guidance on the 2004 Act;

(b)
the distributional impact, by income decile of the population, of changes

made by sections 39 to 43 of this Act;

(c)
a behavioural analysis; and

:
104

, continued

(d)
the financial risk assessment.”

Mr Chancellor of the Exchequer

Agreed to  NS5

To move the following Schedule—

“Pension flexibility: further amendments

Temporary extension of period by which commencement lump sum may precede pension

1
In Schedule 29 to FA 2004 (authorised lump sums under registered pension

schemes) after paragraph 1 (conditions for a lump sum to be a pension

commencement lump sum) insert—

“1A(1)
Paragraph 1(1)(c) is to be omitted when deciding whether a lump

sum to which this paragraph applies is a pension commencement

lump sum.

      (2)
This paragraph applies to a lump sum if—

(a)
the sum is paid in respect of a money purchase

arrangement,

(b)
the sum is paid before the member becomes entitled to the

sum,

(c)
either—

(i)
the sum is paid on or after 19 September 2013 but

before 6 April 2015, or

(ii)
the sum is paid before 19 September 2013, a

contract for a lifetime annuity is entered into to

provide the pension in connection with which the

sum is paid, and on or after 19 March 2014 the

contract is cancelled, and

(d)
the member becomes entitled to the sum before 6 October

2015.

      (3)
Where—

(a)
a lump sum to which this paragraph applies is a pension

commencement lump sum but would not be a pension

commencement lump sum if sub-paragraph (1) were

omitted, and

(b)
the lump sum is paid to the member in connection with a

pension under the scheme to which it is expected that the

member will become entitled (“the expected pension”),


no lump sum paid to the member out of the expected-pension fund

is a pension commencement lump sum; and here “the expected-

pension fund” means the sums and assets that from time to time

represent the sums and assets that, when the lump sum mentioned

in paragraph (a) was paid, were held for the purpose of providing

the expected pension.

      (4)
For the purposes of sub-paragraph (2), if the circumstances are as

described in sub-paragraph (2)(c)(ii), the member is treated as not

having become entitled to the arranged pension as a result of the

:
105

, continued

cancelled contract having been entered into; and here “the arranged

pension” means the pension that would have been provided by that

contract had it not been cancelled.”

Temporary relaxation to allow transfer of pension rights after lump sum paid

2    (1)
In Schedule 29 to FA 2004 after paragraph 1A insert—

“1B(1)
When deciding whether a lump sum to which this paragraph applies

is a pension commencement lump sum—

(a)
paragraph 1(1)(aa) and (c) and (3) are to be omitted,

(b)
paragraph 1(4) is to be treated as referring to the actual

pension (see sub-paragraph (2)(h) of this paragraph), and

(c)
paragraph 2(2) is to be treated as referring to the

arrangement under which the member was expected to

become entitled to the expected pension (see sub-paragraph

(2)(b) of this paragraph).

      (2)
This paragraph applies to a lump sum if—

(a)
the sum is paid in respect of a money purchase

arrangement,

(b)
the sum is paid to the member in connection with a pension

under a registered pension scheme to which it is expected

that the member will become entitled (“the expected

pension”),

(c)
the expected pension is income withdrawal, a lifetime

annuity or a scheme pension,

(d)
the sum is paid before the member becomes entitled to the

expected pension,

(e)
either—

(i)
the sum is paid on or after 19 September 2013 but

before 6 April 2015, or

(ii)
the sum is paid before 19 September 2013, a

contract for a lifetime annuity is entered into to

provide the expected pension, and on or after 19

March 2014 the contract is cancelled,

(f)
the sum is not repaid at any time before 6 October 2015,

(g)
before the member becomes entitled to the expected

pension, there is a recognised transfer of the sums and

assets that immediately before the transfer represent the

sums and assets that when the sum was paid were held for

the purpose of providing the expected pension,

(h)
the member becomes entitled before 6 October 2015 to a

pension under the scheme to which the recognised transfer

is made (“the actual pension”),

(i)
the actual pension is income withdrawal, a lifetime annuity

or a scheme pension, or some combination of them, and

(j)
all of the sums and assets that represent the sums and assets

transferred by the recognised transfer are used to provide

the actual pension.

      (3)
If a lump sum to which this paragraph applies is a pension

commencement lump sum, any lump sum paid—

(a)
to the member,

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106

, continued

(b)
by the scheme to which the recognised transfer mentioned

in sub-paragraph (2)(g) is made or by any other registered

pension scheme (including the scheme from which the

transfer was made), and

(c)
in connection with the member’s becoming entitled to the

actual pension,


is not a pension commencement lump sum.

      (4)
For the purposes of sub-paragraph (2), if the circumstances are as

described in sub-paragraph (2)(e)(ii), the member is treated as not

having become entitled to the expected pension as a result of the

cancelled contract having been entered into.”

      (2)
In section 166(2) of FA 2004 (time at which a person becomes entitled to a

lump sum)—

(a)
before paragraph (a) insert—

“(za)
in the case of a pension commencement lump sum to

which paragraph 1B of Schedule 29 applies (certain

sums paid before 6 April 2015), immediately before

the person becomes entitled to the actual pension (see

paragraph 1B(2)(h) of that Schedule),”, and

(b)
in paragraph (a) for “of a” substitute “of any other”.

Temporary relaxation to allow lump sum to be repaid to pension scheme that paid it

3
In Chapter 3 of Part 4 of FA 2004 (payments by registered pension schemes)

after section 185I insert—

“Repayments of lump sums

185J
Effect of repayment of certain pre-6 April 2015 lump sums

(1)
For the purposes of this Part—

(a)
a lump sum to which this section applies is treated as never

having been paid, and

(b)
the payment by which it is repaid is treated as not being a

payment.

(2)
This section applies to a lump sum if—

(a)
the sum is paid by a registered pension scheme to a member

of the scheme in respect of a money purchase arrangement,

(b)
the sum is paid to the member in connection with a pension

under the scheme to which it is expected that the member will

become entitled (“the expected pension”),

(c)
the expected pension is income withdrawal, a lifetime annuity

or a scheme pension,

(d)
the sum is paid before the member becomes entitled to the

expected pension,

(e)
either—

(i)
the sum is paid on or after 19 September 2013 but

before 6 April 2015, or

(ii)
the sum is paid before 19 September 2013, a contract

for a lifetime annuity is entered into to provide the

expected pension, and on or after 19 March 2014 the

contract is cancelled,

:
107

, continued

(f)
before the member becomes entitled to the expected pension,

the member repays the sum to the pension scheme that paid it,

and

(g)
the repayment is made before 6 October 2015.

(3)
For the purposes of subsection (2), if the circumstances are as

described in subsection (2)(e)(ii), the member is treated as not having

become entitled to the expected pension as a result of the cancelled

contract having been entered into.”

Calculation of “applicable amount” in certain cases

4
In paragraph 3 of Schedule 29 to FA 2004 (pension commencement lump

sums: applicable amount) after sub-paragraph (8) insert—

  “(8A)
Sub-paragraphs (1) to (8) have effect subject to the following—

(a)
if—

(i)
paragraph 1A or 1B applies to the lump sum,

(ii)
the lump sum is paid more than 6 months before

the day on which the member becomes entitled to

it,

(iii)
a contract for a lifetime annuity is entered into to

provide the pension in connection with which the

lump sum is paid, and

(iv)
on or after 19 March 2014 the contract is cancelled,


the applicable amount is one third of the annuity purchase

price that would have been given by sub-paragraphs (4) to

(5) in the case of that annuity had the contract not been

cancelled, and

(b)
if—

(i)
paragraph 1A or 1B applies to the lump sum,

(ii)
the lump sum is paid more than 6 months before

the day on which the member becomes entitled to

it, and

(iii)
paragraph (a) does not apply,


the applicable amount is one third of the sums, plus one

third of the then market value of the assets, held at the time

the lump sum is paid for the purpose of providing the

pension at that time expected to be the pension in

connection with which the lump sum is paid.

    (8B)
For the purposes of sub-paragraph (8A)(a)(ii), the member is

treated as not having become entitled to a pension as a result of the

cancelled contract having been entered into.”

Expected pension commencement lump sums treated as trivial commutation lump sums

5    (1)
In section 166(1) of FA 2004, in the lump sum rule, omit the “or” after

paragraph (f), and after paragraph (g) insert “, or

(h)
a transitional 2013/14 lump sum.”

      (2)
In Schedule 29 to FA 2004, after paragraph 11 insert—

:
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, continued

“Transitional 2013/14 lump sum, and its related trivial commutation lump sum

11A(1)
A lump sum is a transitional 2013/14 lump sum for the purposes of

this Part if—

(a)
the sum (“the earlier sum”) is paid to the member in

connection with a pension under a registered pension

scheme to which it is expected that the member will

become entitled (“the expected pension”),

(b)
the earlier sum is paid before the member becomes entitled

to the expected pension,

(c)
either—

(i)
the earlier sum is paid on or after 19 September

2013 but before 27 March 2014, or

(ii)
the earlier sum is paid before 19 September 2013,

a contract for a lifetime annuity is entered into to

provide the expected pension, and on or after 19

March 2014 the contract is cancelled,

(d)
all of the sums and assets for the time being representing

the sums and assets that when the earlier sum was paid

were held for the purpose of providing the expected

pension are, before the member becomes entitled to the

expected pension, used in paying a further lump sum to the

member (“the further sum”),

(e)
the further sum is paid on or after 6 July 2014 but before 6

April 2015, and

(f)
the further sum is a trivial commutation lump sum (see sub-

paragraph (2)).

      (2)
Sub-paragraph (4) applies when deciding under paragraph 7

whether the further sum is a trivial commutation lump sum in a case

where the earlier sum is paid before the nominated date (see

paragraph 7(3) for the meaning of “the nominated date”).

      (3)
If the earlier sum is a transitional 2013/14 lump sum, and the earlier

sum and the further sum are not the only lump sums paid under

registered pension schemes to the member, sub-paragraph (4)

applies when deciding under paragraph 7 whether any other lump

sum paid under a registered pension scheme to the member is a

trivial commutation lump sum.

      (4)
If this sub-paragraph applies, the payment of the earlier sum is to be

treated for the purposes of paragraph 8(1)(b) as a benefit

crystallisation event—

(a)
which occurs when the earlier sum is paid, and

(b)
on which the amount crystallised is the amount of the

earlier sum.

      (5)
If the earlier sum is a transitional 2013/14 lump sum, and only the

sums and assets mentioned in sub-paragraph (1)(d) are used in

paying the further sum, section 636B of ITEPA 2003 applies in

relation to the further sum with the omission of its subsection (3).

      (6)
If the earlier sum is a transitional 2013/14 lump sum, and the sums

and assets mentioned in sub-paragraph (1)(d) are used together with

other sums and assets in paying the further sum—

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, continued

(a)
section 636B of ITEPA 2003 applies in relation to the

further sum as if instead of the further sum there were two

separate trivial commutation lump sums as follows—

(i)
one (“the first part of the further sum”) consisting

of so much of the further sum as is attributable to

the sums and assets mentioned in sub-paragraph

(1)(d), and

(ii)
another consisting of the remainder of the further

sum,

(b)
the first part of the further sum is to be treated for the

purposes of section 636B of ITEPA 2003 as having been

paid immediately before the remainder of the further sum,

(c)
section 636B of ITEPA 2003 applies in relation to the first

part of the further sum with the omission of its subsection

(3), and

(d)
for the purposes of applying section 636B(3) of ITEPA

2003 in relation to the remainder of the further sum, the

rights to which the first part of the further sum relates are to

be treated as rights that are not uncrystallised rights

immediately before the remainder of the further sum is

paid.

      (7)
For the purposes of sub-paragraph (1), if the circumstances are as

described in sub-paragraph (1)(c)(ii), the member is treated as not

having become entitled to the expected pension as a result of the

cancelled contract having been entered into.”

      (3)
In section 636A of ITEPA 2003 (income tax exemption for certain lump

sums)—

(a)
in subsection (1) after paragraph (c) insert—

“(ca)
a transitional 2013/14 lump sum,”, and

(b)
in subsection (6) (definitions) omit the “and”, and after ““short service

refund lump sum”,” insert “and

“transitional 2013/14 lump sum”,”.

      (4)
In section 280(2) of FA 2004 (index of expressions) at the appropriate place

insert—

“transitional 2013/14 lump sum
paragraph 11A of Schedule 29”.

Small pot lump sums

6    (1)
In the Registered Pension Schemes (Authorised Payments) Regulations 2009

(S.I. 2009/1171) after regulation 3 insert—

“3A(1)
This regulation applies to a lump sum if—

(a)
the sum (“the earlier sum”) is paid under a registered

pension scheme to a member of the scheme,

(b)
the earlier sum is paid to the member in connection with a

pension under a registered pension scheme to which it is

expected that the member will become entitled (“the

expected pension”),

(c)
the earlier sum is paid before the member becomes entitled

to the expected pension,

(d)
either—



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