Session 2014 - 15
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Other Bills before Parliament


 
 

Public Bill Committee:                               

85

 

, continued

 
 

(a)    

in relation to—

 

(i)    

a drawdown pension fund lump sum death benefit

 

under paragraph 17(2) of Schedule 29, or

 

(ii)    

a flexi-access drawdown fund lump sum death benefit

 

under paragraph 17A(2) of Schedule 29,

 

    

as a reference to a dependant (and to the dependant’s death),

 

(b)    

in relation to a flexi-access drawdown fund lump sum death

 

benefit under paragraph 17A(2A) of Schedule 29, as a

 

reference to a nominee (and to the nominee’s death), and

 

(c)    

in relation to a flexi-access drawdown fund lump sum death

 

benefit under paragraph 17A(2B) of Schedule 29, as a

 

reference to a successor (and to the successor’s death).”

 

      (3)  

After subsection (1A) insert—

 

“(1B)    

The special lump sum death benefits charge also arises where—

 

(a)    

a lump sum death benefit is paid by a registered pension

 

scheme in respect of a member of the scheme who had not

 

reached the age of 75 at the date of the member’s death,

 

(b)    

the lump sum death benefit is—

 

(i)    

a drawdown pension fund lump sum death benefit

 

under paragraph 17(1) of Schedule 29,

 

(ii)    

a flexi-access drawdown fund lump sum death benefit

 

under paragraph 17A(1) of Schedule 29, or

 

(iii)    

an uncrystallised funds lump sum death benefit, and

 

(c)    

the lump sum death benefit is not paid before the end of the

 

period of two years beginning with the earlier of the day on

 

which the scheme administrator of the scheme first knew of

 

the member’s death and the day on which the scheme

 

administrator could first reasonably have been expected to

 

have known of it.

 

(1C)    

The special lump sum death benefits charge also arises where—

 

(a)    

a lump sum death benefit is paid by a registered pension

 

scheme on the death of a dependant, nominee or successor of

 

a deceased member of the scheme,

 

(b)    

the dependant, nominee or successor (“the beneficiary”) had

 

not reached the age of 75 at the date of the beneficiary’s death,

 

(c)    

the lump sum death benefit is—

 

(i)    

a drawdown pension fund lump sum death benefit

 

under paragraph 17(2) of Schedule 29, or

 

(ii)    

a flexi-access drawdown fund lump sum death benefit

 

under paragraph 17A(2), (2A) or (2B) of Schedule 29,

 

and

 

(d)    

the lump sum death benefit is not paid before the end of the

 

period of two years beginning with the earlier of the day on

 

which the scheme administrator of the scheme first knew of

 

the beneficiary’s death and the day on which the scheme

 

administrator could first reasonably have been expected to

 

have known of it.”


 
 

Public Bill Committee:                               

86

 

, continued

 
 

      (4)  

For subsection (7) (lump sum death benefits which are not to be treated as

 

income for tax purposes) substitute—

 

“(7)    

A lump sum death benefit in respect of which income tax is charged

 

under this section is not to be treated as income for any purpose of the

 

Tax Acts.”

 

      (5)  

In consequence of sub-paragraph (4) omit paragraph 41(5) of Schedule 16 to

 

FA 2011.

 

18         

In section 280(2) of FA 2004 (index of defined expressions) in the entry for

 

“special lump sum death benefits charge” for “206(1)” substitute “206”.

 

Uncrystallised funds lump sum death benefit

 

19  (1)  

In paragraph 15 of Schedule 29 to FA 2004 (uncrystallised funds lump sum

 

death benefit)—

 

(a)    

in sub-paragraph (1) omit the second sentence (lump sum is

 

uncrystallised funds lump sum death benefit only if paid before end of

 

relevant two-year period), and

 

(b)    

omit sub-paragraph (1A) (meaning of “relevant two-year period” in

 

the second sentence of sub-paragraph (1)).

 

      (2)  

In paragraph 16 of Schedule 32 to FA 2004 (benefit crystallisation event 7:

 

uncrystallised funds lump sum death benefit is a “relevant lump sum death

 

benefit”)—

 

(a)    

in sub-paragraph (b) after “benefit” insert “, other than one—

 

(i)    

paid by a registered pension scheme in respect of a

 

member of the scheme who had not reached the

 

age of 75 at the date of the member’s death, but

 

(ii)    

not paid before the end of the relevant two-year

 

period”, and

 

(b)    

after sub-paragraph (b) insert—

 

            

“In sub-paragraph (b)(ii) “the relevant two-year period”, in

 

relation to a member of a registered pension scheme, means

 

the period of two years beginning with the earlier of the day

 

on which the scheme administrator of the scheme first

 

knew of the member’s death and the day on which the

 

scheme administrator could first reasonably have been

 

expected to have known of it.”

 

      (3)  

In section 636A of ITEPA 2003 (exemption for certain lump sums under

 

registered pension schemes)—

 

(a)    

in subsection (1) (lump sums on which there is no liability to income

 

tax)—

 

(i)    

after paragraph (ca) insert “or”, and

 

(ii)    

omit paragraph (e) and the “or” preceding it (uncrystallised

 

funds lump sum death benefit paid in respect of member who

 

dies under 75), and

 

(b)    

in subsection (4)(aa) (on uncrystallised funds lump sum death benefit

 

paid in respect of member who dies having reached 75 there is no

 

liability to income tax other than liability under section 206 of FA

 

2004) omit “paid in respect of a member who had reached the age of

 

75 at the date of the member’s death”.

 

      (4)  

In consequence of sub-paragraphs (1) and (3) omit—

 

(a)    

paragraphs 35(2)(c) and (3) and 42(2)(c) of Schedule 16 to FA 2011,

 

and


 
 

Public Bill Committee:                               

87

 

, continued

 
 

(b)    

paragraph 28(2)(a) of Schedule 19 to FA 2007.

 

Commencement

 

20         

The amendments made by paragraphs 17 and 19 apply to lump sums paid on

 

or after 6 April 2015, and the amendment made by paragraph 18 comes into

 

force on that day.

 

Uncrystallised rights at member’s death

 

21         

In section 216(1) of FA 2004 (benefit crystallisation events and amounts

 

crystallised), in the table, after the entry relating to benefit crystallisation event

 

5B insert—

 

“5C. The designation, on or

The aggregate of the amount of

 
 

after 6 April 2015 but before

the sums and the market value

 
 

the end of the relevant two-

of the assets designated”

 
 

year period, of relevant unused

  
 

uncrystallised funds as

  
 

available for the payment, to a

  
 

dependant or nominee of the

  
 

individual, of (as the case may

  
 

be) dependants’ flexi-access

  
 

drawdown pension or

  
 

nominees’ flexi-access

  
 

drawdown pension

  
 

22  (1)  

Section 217 of FA 2004 (persons liable to lifetime allowance charge) is

 

amended as follows.

 

      (2)  

After subsection (1) insert—

 

“(1A)    

Subsection (1) is subject to subsections (2) and (2A).”

 

      (3)  

In subsection (2) for “But where” substitute “Where”.

 

      (4)  

After subsection (2) insert—

 

“(2A)    

Where the liability arises by reason of a designation mentioned in the

 

description of benefit crystallisation event 5C, it is a liability of the

 

dependant or nominee (as the case may be).”

 

      (5)  

For subsections (3) and (4) (multiple relevant lump sum death benefits)

 

substitute—

 

“(3)    

Subsection (4) applies if—

 

(a)    

two or more relevant post-death benefit crystallisation events

 

occur in respect of an individual, and

 

(b)    

tax is not chargeable on the whole of the total of the amounts

 

crystallised by them.

 

(4)    

The person liable under subsection (2) or (2A) to the lifetime

 

allowance charge charged by reason of the occurrence of any one of

 

the relevant post-death benefit crystallisation events is liable to such

 

portion of the total amount of the tax payable by reason of the relevant

 

post-death benefit crystallisation events having occurred as appears to

 

an officer of Revenue and Customs to be just and reasonable.


 
 

Public Bill Committee:                               

88

 

, continued

 
 

(4A)    

For the purposes of subsections (3) and (4), a benefit crystallisation

 

event is a “relevant post-death benefit crystallisation event” if it is

 

benefit crystallisation event 5C or 7.”

 

      (6)  

The amendment made by sub-paragraph (5) comes into force on 6 April 2015.

 

23  (1)  

Section 219 of FA 2004 (availability of individual’s lifetime allowance) is

 

amended as follows.

 

      (2)  

In subsection (7) (cases where there is more than one benefit crystallisation

 

event 7)—

 

(a)    

after “more than one” insert “relevant post-death”,

 

(b)    

omit “by reason of the payment of lump sum death benefits”, and

 

(c)    

for “individual the” substitute “individual, the relevant post-death”.

 

      (3)  

After subsection (7) insert—

 

“(7A)    

For the purposes of subsection (7), a benefit crystallisation event is a

 

“relevant post-death benefit crystallisation event” if it is benefit

 

crystallisation event 5C or 7.”

 

      (4)  

The amendments made by this paragraph come into force on 6 April 2015.

 

24  (1)  

Schedule 32 to FA 2004 (supplementary provisions about benefit

 

crystallisation events) is amended as follows.

 

      (2)  

In paragraph 1 (meaning of “the relevant pension schemes”: in certain cases

 

means schemes of which the individual was a member immediately before

 

death) before “7” insert “5C or”.

 

      (3)  

After paragraph 14A insert—

 

“Benefit crystallisation event 5C: meaning of “relevant two-year period”

 

14B      

For the purposes of benefit crystallisation event 5C “the relevant

 

two-year period”, in relation to relevant unused uncrystallised

 

funds held for the purposes of a money purchase arrangement

 

relating to the individual under any of the relevant pension

 

schemes, means the period of two years beginning with the earlier

 

of the day on which the scheme administrator of the scheme first

 

knew of the individual’s death and the day on which the scheme

 

administrator could first reasonably have been expected to have

 

known of it.

 

Benefit crystallisation event 5C: meaning of “relevant unused uncrystallised

 

funds”

 

14C(1)  

For the purposes of benefit crystallisation event 5C, sums or assets

 

held after the death of the individual for the purposes of a money

 

purchase arrangement relating to the individual under any of the

 

relevant pension schemes are relevant unused uncrystallised funds

 

if—

 

(a)    

they are unused uncrystallised funds, and

 

(b)    

the individual had not reached the age of 75 at the date of

 

the individual’s death.

 

      (2)  

Paragraph 27E(4) and (5) of Schedule 28 (meaning of “unused

 

uncrystallised funds”) apply for the purposes of sub-paragraph

 

(1)(a), but as if references to the member were references to the

 

individual.”


 
 

Public Bill Committee:                               

89

 

, continued

 
 

Income tax on beneficiaries’ income withdrawal

 

25  (1)  

ITEPA 2003 is amended as follows.

 

      (2)  

In section 573 (foreign pensions to which section 573 applies) after subsection

 

(2) insert—

 

“(2A)    

This section does not apply to pension within section 574(1)(ba) if—

 

(a)    

the pension is paid in respect of a deceased member of a

 

pension scheme who had not reached the age of 75 at the date

 

of death, and

 

(b)    

no pension payments to the person entitled to the pension

 

were made before 6 April 2015 in respect of the deceased

 

member out of any of the following—

 

(i)    

the fund from which the pension is paid, and

 

(ii)    

any fund represented (to any extent) by that fund.

 

(2B)    

This section does not apply to pension within section 574(1)(bb) if the

 

pension is paid in respect of a deceased individual who had not

 

reached the age of 75 at the date of death.

 

(2C)    

Subsection (2A) is subject to subsection (2D).

 

(2D)    

This section does apply to pension within section 574(1)(ba) paid in

 

respect of a deceased member of a pension scheme who had not

 

reached the age of 75 at the date of death if the pension is paid in

 

respect of sums or assets held for the purposes of the pension scheme

 

under which the pension is paid (“the paying scheme”) that would, if

 

the paying scheme were a registered pension scheme, be sums or

 

assets—

 

(a)    

representing unused uncrystallised funds (within the meaning

 

of paragraph 27E(4) and (5) of Schedule 28 to FA 2004) in the

 

deceased member’s case,

 

(b)    

designated on or after 6 April 2015 as available for the

 

payment of dependants’ drawdown pension or nominees’

 

drawdown pension, but

 

(c)    

not so designated before the end of the period of two years

 

beginning with the earlier of the day on which the scheme

 

manager of the paying scheme first knew of the member’s

 

death and the day on which the scheme manager could first

 

reasonably have been expected to have known of it.”

 

      (3)  

In section 574(1) (foreign pensions: meaning of “pension”)—

 

(a)    

in paragraph (b) (“pension” includes amounts corresponding to

 

income withdrawal or dependants’ income withdrawal)—

 

(i)    

omit “or dependants’ income withdrawal”, and

 

(ii)    

for “paragraphs 7 and 21” substitute “paragraph 7”, and

 

(b)    

before the “and” at the end of paragraph (b) insert—

 

“(ba)    

an amount paid under a relevant non-UK scheme or

 

an overseas pension scheme which, if the scheme

 

were a registered pension scheme, would be

 

dependants’ income withdrawal or nominees’ income

 

withdrawal (within the meaning of paragraphs 21 and

 

27D of Schedule 28 to FA 2004),


 
 

Public Bill Committee:                               

90

 

, continued

 
 

(bb)    

an amount paid under a relevant non-UK scheme or

 

an overseas pension scheme which, if the scheme

 

were a registered pension scheme, would be

 

successors’ income withdrawal (within the meaning

 

of paragraph 27J of Schedule 28 to FA 2004),”.

 

      (4)  

In section 579A(1) (section applies to pensions under registered pension

 

schemes, subject to subsection (2)) after “subsection (2)” insert “and section

 

579CZA”.

 

      (5)  

After section 579C insert—

 

“579CZA 

Exemption for beneficiaries’ income withdrawal in some cases

 

(1)    

Section 579A does not apply to dependants’ income withdrawal or

 

nominees’ income withdrawal if it is paid—

 

(a)    

in respect of a deceased member of a registered pension

 

scheme who had not reached the age of 75 at the date of the

 

member’s death, and

 

(b)    

to a person from the person’s—

 

(i)    

dependant’s drawdown pension fund,

 

(ii)    

dependant’s flexi-access drawdown fund, or

 

(iii)    

nominee’s flexi-access drawdown fund,

 

    

in respect of a money purchase arrangement under a registered

 

pension scheme.

 

(2)    

Section 579A does not apply to successors’ income withdrawal if it is

 

paid—

 

(a)    

in respect of a deceased beneficiary of a deceased member of

 

a registered pension scheme where the beneficiary had not

 

reached the age of 75 at the date of the beneficiary’s death,

 

and

 

(b)    

to a person from the person’s successor’s flexi-access

 

drawdown fund in respect of a money purchase arrangement

 

under a registered pension scheme,

 

    

and here “beneficiary” means dependant, nominee or successor.

 

(3)    

Subsection (1) is subject to the following provisions of this section.

 

(4)    

Section 579A does apply to dependants’ income withdrawal paid on

 

or after 6 April 2015 to a person from the person’s dependant’s

 

drawdown pension fund in respect of a money purchase arrangement

 

under a registered pension scheme (“the drawdown fund”) if before 6

 

April 2015—

 

(a)    

any payment of dependants’ income withdrawal was made

 

from—

 

(i)    

the drawdown fund, or

 

(ii)    

any fund represented (to any extent) by the drawdown

 

fund, or

 

(b)    

any payment was made of a dependants’ short-term annuity

 

purchased using sums or assets out of—

 

(i)    

the drawdown fund, or

 

(ii)    

any fund represented (to any extent) by the drawdown

 

fund.

 

(5)    

Section 579A does apply to dependants’ income withdrawal paid in

 

respect of a deceased member of a registered pension scheme to a


 
 

Public Bill Committee:                               

91

 

, continued

 
 

person from the person’s dependant’s flexi-access drawdown fund in

 

respect of a money purchase arrangement under a registered pension

 

scheme (“the new fund”) if—

 

(a)    

any of the sums or assets that make up the new fund—

 

(i)    

became newly-designated dependant funds under

 

paragraph 22A(2)(b) of Schedule 28 to FA 2004 or as

 

a result of the operation of any of paragraphs 22B to

 

22D of that Schedule, or

 

(ii)    

arise, or (directly or indirectly) derive, from any such

 

newly-designated dependant funds or from sums or

 

assets which so arise or derive,

 

(b)    

before 6 April 2015 any payment of dependants’ income

 

withdrawal in respect of the deceased member was made to

 

the person from the person’s dependant’s drawdown pension

 

fund in respect of a money purchase arrangement under a

 

registered pension scheme, and

 

(c)    

any of the sums or assets that made up that fund at the time of

 

that payment to any extent make up, or are represented by

 

sums or assets that to any extent make up, the new fund.

 

(6)    

Where relevant unused uncrystallised funds—

 

(a)    

are designated on or after 6 April 2015 as available for the

 

payment of dependants’ drawdown pension or nominees’

 

drawdown pension, and

 

(b)    

as a result of the designation make up (to any extent) a

 

person’s dependant’s flexi-access drawdown fund or

 

nominee’s flexi-access drawdown fund in respect of a money

 

purchase arrangement under a registered pension scheme, but

 

(c)    

are not so designated before the end of the relevant two-year

 

period,

 

    

section 579A does apply to dependants’ income withdrawal or

 

nominees’ income withdrawal paid to the person from the fund so far

 

as it is paid in respect of sums or assets for the time being representing

 

the whole or any part of those relevant unused uncrystallised funds.

 

(7)    

In this section—

 

“dependant”, “nominee” and “successor” have the meaning given

 

(respectively) by paragraphs 15, 27A and 27F of Schedule 28 to FA

 

2004,

 

“dependant’s drawdown pension fund”, “dependant’s flexi-access

 

drawdown fund”, “nominee’s flexi-access drawdown fund” and

 

“successor’s flexi-access drawdown fund” have the meaning given

 

(respectively) by paragraphs 22, 22A, 27E and 27K of Schedule 28 to

 

FA 2004,

 

“money purchase arrangement” has the meaning given by section 152 of

 

FA 2004, and

 

“the relevant two-year period”, in relation to relevant unused

 

uncrystallised funds held for the purposes of a money purchase

 

arrangement relating to a deceased individual under a registered

 

pension scheme, means the period of two years beginning with the

 

earlier of the day on which the scheme administrator of the scheme

 

first knew of the individual’s death and the day on which the scheme

 

administrator could first reasonably have been expected to have

 

known of it.


 
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