A
BILL
TO
Make provision in connection with the taxation of pensions.
Be it enacted by the Queen’s most Excellent Majesty, by and with the advice and
consent of the Lords Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same, as follows:—
The Schedule has effect. In the Schedule—
Part 1 contains provision about flexibly accessing certain drawdown
funds,
5Part 2 contains provision about removing certain restrictions relating to
annuities to which individuals become entitled on or after 6 April 2015,
Part 3 contains provision about authorising one-off pension payments not
made through a drawdown fund,
Part 4 contains provision about charging the annual allowance charge, in
10cases where an individual has flexibly accessed pension rights, on
inputs in respect of money purchase arrangements (and some hybrid
arrangements) so far as they exceed £10,000 in a tax year,
Part 5 contains further provision in connection with the taxation of
pensions,
15Part 6 contains provision about the giving of information, and
Part 7 contains provision about overseas pensions.
(1)
Chapter 5 of Part 4 of FA 2004 (registered pension schemes: tax charges) is
amended as follows.
(2)
20In section 206(1) (special lump sum death benefits charge arises where certain
lump sums are paid by a registered pension scheme) after “registered pension
scheme” insert “in respect of a member who had reached the age of 75 at the
date of the member’s death”.
(3)
In section 206(4) (special lump sum death benefits charge: rate of charge) for
25“55%” substitute “45%”.
Taxation of Pensions BillPage 2
(4)
In section 205A(4) (serious ill-health lump sum charge: rate of charge) for
“55%” substitute “45%”.
(5)
The amendments made by this section apply to lump sums paid on or after 6
April 2015.
(1) This Act may be cited as the Taxation of Pensions Act 2014.
(2) In this Act—
(a) “FA”, followed by a year, means the Finance Act of that year, and
(b) “ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003.
(3)
10The Commissioners for Her Majesty’s Revenue and Customs may by
regulations make such amendments of Part 4 of FA 2004, or Part 9 of ITEPA
2003, as the Commissioners consider appropriate in consequence of this Act.
(4)
For the purposes of section 282 of FA 2004 and section 1014 of the Income Tax
Act 2007 (orders and regulations), the power under subsection (3) of this
15section is treated as a power under Part 4 of FA 2004 (so that section 282, and
not section 1014, applies in relation to regulations made under subsection (3)).
Taxation of Pensions BillPage 3
Section 1
1
In section 165(1) of FA 2004 (the pension rules) in pension rule 5 (annual cap
on drawdown pension) after “in each drawdown pension year” insert “from,
or under a short-term annuity purchased using sums or assets out of, the
member’s drawdown pension fund”.
2
10In paragraph 8(1A) of Schedule 28 to FA 2004 (meaning of “member’s
drawdown pension fund”: funds designated as available for drawdown)—
(a) in the opening words omit “they”,
(b)
in paragraph (a) for “have been designated at any time” substitute
“they have, at any time before 6 April 2015, been designated”,
(c) 15before the “or” at the end of paragraph (a) insert—
“(aa)
they have, at any time on or after 6 April 2015, been
designated under the arrangement as available for
the payment of drawdown pension, and—
(i)
sums or assets held for the purposes of the
20arrangement have, at any time before 6
April 2015, been designated under the
arrangement as so available, and
(ii)
section 165(3A) did not apply to the
arrangement immediately before 6 April
252015,”, and
(d) in paragraph (b)—
(i) at the beginning insert “they”, and
(ii)
for “sums or assets which have been so designated or”
substitute “member-designated funds under paragraph (a) or
30(aa) or from sums or assets”.
3 (1) In Schedule 28 to FA 2004 after paragraph 8 insert—
8A
(1)
For the purposes of this Part the member’s flexi-access drawdown
35fund in respect of an arrangement consists of such of the sums or
assets held for the purposes of the arrangement as are newly-
designated funds.
Taxation of Pensions BillPage 4
(2)
For the purposes of this Part sums or assets held for the purposes
of an arrangement are newly-designated funds if—
(a) they—
(i)
have, at any time on or after 6 April 2015, been
5designated under the arrangement as available for
the payment of drawdown pension, and
(ii) are not member-designated funds, or
(b)
they were member-designated funds immediately before 6
April 2015 and section 165(3A) applied to the arrangement
10at that time, or
(c)
they have become newly-designated funds by the
operation of paragraph 8B, 8C or 8D, or
(d)
they arise, or (directly or indirectly) derive, from newly-
designated funds under paragraph (a), (b) or (c) or from
15sums or assets which so arise or derive.
(3)
Any sums or assets that become newly-designated funds under
sub-paragraph (2)(b) cease to be member-designated funds as
from the start of 6 April 2015.
8B (1) 20Sub-paragraph (2) applies if—
(a)
a member’s drawdown pension fund in respect of an
arrangement came into being before 6 April 2015,
(b)
section 165(3A) did not apply to the arrangement
immediately before 6 April 2015, and
(c) 25at a time on or after 6 April 2015, a payment—
(i) of income withdrawal from the fund, or
(ii)
of a short-term annuity purchased using sums or
assets out of the fund,
is made that (apart from sub-paragraph (2)) would breach
30the cap.
(2)
The sums and assets that make up the fund immediately before
the payment is made become newly-designated funds
immediately before the payment is made (so that the payment is
made out of the member’s flexi-access drawdown fund in respect
35of the arrangement and therefore is not part of the total capped by
pension rule 5).
(3)
For the purposes of sub-paragraph (1)(c), a payment of drawdown
pension in respect of an arrangement is one that would breach the
cap if, when its amount is added to the amounts of any drawdown
40pension in respect of the arrangement—
(a) paid—
(i) before it is made, but
(ii)
in the same drawdown pension year in respect of
the arrangement, or
(b) 45paid at the time it is made,
the total is greater than the cap set by pension rule 5 for that
drawdown pension year.
8C (1) Sub-paragraph (2) applies if—
Taxation of Pensions BillPage 5
(a)
a member’s drawdown pension fund in respect of an
arrangement came into being before 6 April 2015,
(b)
section 165(3A) did not apply to the arrangement
immediately before 6 April 2015, and
(c)
5the member notifies the scheme administrator that the
member wishes the fund to become the member’s flexi-
access drawdown fund in respect of the arrangement.
(2) At—
(a)
the time the scheme administrator accepts the notification,
10or
(b) the start of 6 April 2015 if that is later,
the sums and assets that then make up that fund become newly-
designated funds, if they have not previously done so by the
operation of paragraph 8B.
8D (1) 15Sub-paragraphs (2) and (3) apply if—
(a)
there is a recognised transfer from one registered pension
scheme (“the old scheme”) to another registered pension
scheme (“the new scheme”) of member-designated funds
held for the purposes of an arrangement under the old
20scheme, and
(b)
the sums or assets transferred are, under the arrangement
under the new scheme for whose purposes they are first
held after the transfer, designated as available for the
payment of drawdown pension.
(2)
25If the member, when or before making the designation, notifies the
scheme administrator of the new scheme that the member wishes
the sums or assets to be newly-designated funds, the sums or
assets become newly-designated funds and do so—
(a) when the designation is made, or
(b) 30if later, immediately after the transfer,
except that, if both the designation and transfer are made before 6
April 2015, the sums or assets become newly-designated funds at
the start of 6 April 2015.
(3)
If sub-paragraph (2) does not provide for the sums or assets to
35become newly-designated funds, the sums or assets become
member-designated funds and do so—
(a) when the designation is made, or
(b) if later, immediately after the transfer.”
(2)
Sub-paragraph (1), so far as it inserts the new paragraph 8D, has effect in
40relation to—
(a)
cases where both the designation and transfer are made after the end
of 2 months beginning with the day on which this Act is passed, and
(b) cases not within paragraph (a) where—
(i)
the transfer is made before 6 April 2015 and the designation
45is made on or after 6 April 2015, or
(ii)
the designation is made before 6 April 2015 and the transfer
is made on or after 6 April 2015.
Taxation of Pensions BillPage 6
4 (1) In Schedule 28 to FA 2004 after paragraph 22 insert—
22A
(1)
For the purposes of this Part a dependant’s flexi-access drawdown
fund in respect of an arrangement consists of such of the sums or
5assets held for the purposes of the arrangement as are newly-
designated dependant funds.
(2)
For the purposes of this Part sums or assets held for the purposes
of an arrangement are newly-designated dependant funds if—
(a) they—
(i)
10have, at any time on or after 6 April 2015, been
designated under the arrangement as available for
the payment of dependants’ drawdown pension,
and
(ii) are not dependant-designated funds, or
(b)
15they were dependant-designated funds immediately
before 6 April 2015 and section 167(2A) applied to the
arrangement at that time, or
(c)
they have become newly-designated dependant funds by
the operation of paragraph 22B, 22C or 22D, or
(d)
20they arise, or (directly or indirectly) derive, from newly-
designated dependant funds under paragraph (a), (b) or
(c) or from sums or assets which so arise or derive.
(3)
Any sums or assets that become newly-designated dependant
funds under sub-paragraph (2)(b) cease to be dependant-
25designated funds as from the start of 6 April 2015.
22B (1) Sub-paragraph (2) applies if—
(a)
a dependant’s drawdown pension fund in respect of an
arrangement came into being before 6 April 2015,
(b)
30section 167(2A) did not apply to the arrangement
immediately before 6 April 2015, and
(c) at a time on or after 6 April 2015, a payment—
(i)
of dependants’ income withdrawal from the fund,
or
(ii)
35of a dependants’ short-term annuity purchased
using sums or assets out of the fund,
is made that (apart from sub-paragraph (2)) would breach
the cap.
(2)
The sums and assets that make up the fund immediately before
40the payment is made become newly-designated dependant funds
immediately before the payment is made (so that the payment is
made out of the dependant’s flexi-access drawdown fund in
respect of the arrangement and therefore is not part of the total
capped by pension death benefit rule 4).
(3)
45For the purposes of sub-paragraph (1)(c), a payment of
dependants’ drawdown pension in respect of an arrangement is
Taxation of Pensions BillPage 7
one that would breach the cap if, when its amount is added to the
amounts of any dependants’ drawdown pension in respect of the
arrangement—
(a) paid—
(i) 5before it is made, but
(ii)
in the same drawdown pension year in respect of
the arrangement, or
(b) paid at the time it is made,
the total is greater than the cap set by pension death benefit rule 4
10for that drawdown pension year.
22C (1) Sub-paragraph (2) applies if—
(a)
a dependant’s drawdown pension fund in respect of an
arrangement came into being before 6 April 2015,
(b)
section 167(2A) did not apply to the arrangement
15immediately before 6 April 2015, and
(c)
the dependant notifies the scheme administrator that the
dependant wishes the fund to become the dependant’s
flexi-access drawdown fund in respect of the arrangement.
(2) At—
(a)
20the time the scheme administrator accepts the notification,
or
(b) the start of 6 April 2015 if that is later,
the sums and assets that then make up that fund become newly-
designated dependant funds, if they have not previously done so
25by the operation of paragraph 22B.
22D (1) Sub-paragraphs (2) and (3) apply if—
(a)
there is a recognised transfer from one registered pension
scheme (“the old scheme”) to another registered pension
scheme (“the new scheme”) of dependant-designated
30funds held for the purposes of an arrangement under the
old scheme, and
(b)
the sums or assets transferred are, under the arrangement
under the new scheme for whose purposes they are first
held after the transfer, designated as available for the
35payment of drawdown pension.
(2)
If the dependant, when or before the designation is made, notifies
the scheme administrator of the new scheme that the dependant
wishes the sums or assets to be newly-designated dependant
funds, the sums or assets become newly-designated dependant
40funds and do so—
(a) when the designation is made, or
(b) if later, immediately after the transfer,
except that, if both the designation and transfer are made before 6
April 2015, the sums or assets become newly-designated
45dependant funds at the start of 6 April 2015.
(3)
If sub-paragraph (2) does not provide for the sums or assets to
become newly-designated dependant funds, the sums or assets
become dependant-designated funds and do so—
(a) when the designation is made, or
Taxation of Pensions BillPage 8
(b) if later, immediately after the transfer.”
(2)
Sub-paragraph (1), so far as it inserts the new paragraph 22D, has effect in
relation to—
(a)
cases where both the designation and transfer are made after the end
5of 2 months beginning with the day on which this Act is passed, and
(b) cases not within paragraph (a) where—
(i)
the transfer is made before 6 April 2015 and the designation
is made on or after 6 April 2015, or
(ii)
the designation is made before 6 April 2015 and the transfer
10is made on or after 6 April 2015.
5 FA 2004 is amended as follows.
6
In section 167(1) (the pension death benefit rules) in pension death benefit
rule 4 (annual cap on dependants’ drawdown pension) after “in each
15drawdown pension year” insert “from, or under a dependants’ short-term
annuity purchased using sums or assets out of, the dependant’s drawdown
pension fund”.
7
In section 168(1), in the lump sum death benefit rule, after paragraph (e)
insert—
“(ea) 20a flexi-access drawdown fund lump sum death benefit,”.
8
In section 169(1D) (regulations about transfers of drawdown funds) after
paragraph (a) insert “or
(aa)
a member’s flexi-access drawdown fund or dependant’s
flexi-access drawdown fund,”.
9 25In section 172B(2) (rights of a “relevant member”)—
(a) omit the “or” at the end of paragraph (aa), and
(b) after paragraph (b) insert “, or
(c)
rights representing the member’s flexi-access
drawdown fund or dependant’s flexi-access
30drawdown fund in respect of an arrangement under
the pension scheme.”
10
In section 172B(7A) (section does not apply to certain increases in rights)
after “dependant’s drawdown pension fund” (in both places) insert “or
dependant’s flexi-access drawdown fund”.
11 35In section 182(3) (value of arrangement for purposes of borrowing limits)—
(a) after paragraph (a) insert—
“(aa)
the amount of such of the sums and the market value
of such of the assets as represent the member’s flexi-
access drawdown fund in respect of the arrangement
40(if any),”, and
(b)
in paragraph (b) after “dependants’ drawdown pension funds”
insert “or dependants’ flexi-access drawdown funds”.
12
In section 182(5) (determining whether rights are uncrystallised) after “the
person’s drawdown pension fund” insert “or the person’s flexi-access
45drawdown fund”.
Taxation of Pensions BillPage 9
13
In section 206(1) (payments which trigger special lump sum death benefits
charge)—
(a) omit the “or” at the end of paragraph (b), and
(b) after paragraph (c) insert “or
(d)
5a flexi-access drawdown fund lump sum death
benefit,”.
14 In section 211(1) (value of crystallised rights for purposes of section 210)—
(a) omit the “and” at the end of paragraph (a), and
(b) after paragraph (b) insert “, and
(c)
10the aggregate of the amount of the sums, and the
market value of the assets, representing the member’s
flexi-access drawdown fund in respect of the
arrangement on that date (if any).”
15
In section 212(2) (value of uncrystallised rights for purposes of section 210:
15rights which are not uncrystallised) after “the member’s drawdown pension
fund” insert “or the member’s flexi-access drawdown fund”.
16
In section 216(1) (benefit crystallisation events and amounts crystallised), in
column 2 of the entry in the table for benefit crystallisation event 5A, after
“representing the individual’s drawdown pension fund under the
20arrangement” insert “(if any), plus the aggregate of the amount of the sums
and the market value of the assets representing the individual’s flexi-access
drawdown fund under the arrangement (if any),”.
17
In section 273A(1) (regulations about certain payments by insurance
companies)—
(a) 25omit the “or” at the end of paragraph (b), and
(b) after paragraph (c) insert “or
(d)
a flexi-access drawdown fund lump sum death
benefit,”.
18
In section 280(2) (index of defined expressions) at the appropriate places
30insert—
| “dependant’s flexi-access drawdown fund |
paragraph 22A of Schedule 28” |
| “flexi-access drawdown fund lump sum death benefit |
paragraph 17A of Schedule 29” |
| “member’s flexi-access drawdown fund |
35paragraph 8A of Schedule 28” |
19
In paragraph 7 of Schedule 28 (meaning of “income withdrawal”) at the end
insert “or from the member’s flexi-access drawdown fund in respect of an
arrangement”.
20
40In paragraph 21 of Schedule 28 (meaning of “dependants’ income
withdrawal”) at the end insert “or from the dependant’s flexi-access
drawdown fund in respect of an arrangement”.