Taxation of Pensions Bill (HC Bill 97)

21 In paragraph 22(2) of Schedule 28 (meaning of “dependant’s drawdown
pension fund”: funds designated as available for dependants’ drawdown
pension)—

(a) in the opening words omit “they”,

(b) 5in paragraph (a) for “have been designated at any time” substitute
“they have, at any time before 6 April 2015, been designated”,

(c) before 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
10the payment of dependants’ drawdown pension to
the dependant, and—

(i) sums or assets held for the purposes of the
arrangement have, at any time before 6
April 2015, been designated under the
15arrangement as so available, and

(ii) section 167(2A) did not apply to the
arrangement immediately before 6 April
2015,”, and

(d) in paragraph (b)—

(i) 20at the beginning insert “they”, and

(ii) for “sums or assets which have been so designated or”
substitute “dependant-designated funds under paragraph (a)
or (aa) or from sums or assets”.

22 In paragraph 3(5)(a) and (8)(a) of Schedule 29 (deductions when calculating
25“applicable amount”) after “of the member’s drawdown pension fund”
insert “or of the member’s flexi-access drawdown fund”.

23 In paragraph 17 of Schedule 29 (meaning of “drawdown pension fund lump
sum death benefit”)—

(a) in sub-paragraph (1)(a) for “under” substitute “to be paid from the
30member’s drawdown pension fund in respect of”, and

(b) in sub-paragraph (2)(c) after “at the date of the dependant’s death”
insert “to be paid from the dependant’s drawdown pension fund”.

24 In Schedule 29 after paragraph 17 insert—

“Flexi-access drawdown fund lump sum death benefit

17A (1) 35For the purposes of this Part a lump sum death benefit is a flexi-
access drawdown fund lump sum death benefit if—

(a) it is paid in respect of income withdrawal to which the
member was entitled to be paid from the member’s flexi-
access drawdown fund in respect of an arrangement at the
40date of the member’s death, and

(b) it is not a charity lump sum death benefit.

(2) A lump sum death benefit is also a flexi-access drawdown fund
lump sum death benefit if—

(a) it is paid on the death of a dependant of the member,

(b) 45it is paid in respect of dependants’ income withdrawal to
which the dependant was at the date of the dependant’s
death entitled to be paid from the dependant’s flexi-access

drawdown fund in respect of an arrangement relating to
the member, and

(c) it is not a charity lump sum death benefit.

(3) But if the amount of a lump sum falling within sub-paragraph (1)
5or (2) exceeds the permitted maximum, the excess is not a flexi-
access drawdown fund lump sum death benefit.

(4) The permitted maximum is the aggregate of—

(a) the amount of the sums, and

(b) the market value of the assets,

10representing the member’s or dependant’s flexi-access drawdown
fund in respect of the arrangement immediately before the
payment is made.”

25 In paragraph 18 of Schedule 29 (meaning of “charity lump sum death
benefit”)—

(a) 15in sub-paragraph (1)(c) after “in respect of an arrangement” insert
“, or in respect of the member’s flexi-access drawdown fund in
respect of an arrangement,”,

(b) in sub-paragraph (2)(d) after “dependant’s drawdown pension
fund” insert “, or the dependant’s flexi-access drawdown fund,”, and

(c) 20in sub-paragraph (4) after “drawdown pension fund” insert “, or
flexi-access drawdown fund,”.

26 In paragraph 4(1) of Schedule 32 (supplementary provision about benefit
crystallisation event 4) at the end insert “or flexi-access drawdown fund”.

27 In paragraph 17(2) of Schedule 32 (supplementary provision about benefit
25crystallisation event 8) after “the individual’s drawdown pension fund”
insert “or flexi-access drawdown fund”.

28 (1) In paragraph 20(4) of Schedule 36 (lifetime allowance: deemed
crystallisation: value of rights to pre-5 April 2006 drawdown pensions)—

(a) in paragraph (b) (arrangements where section 165(3A) of FA 2004
30applies) for “applies” substitute “applied at any time before 6 April
2015”, and

(b) after paragraph (b) insert “, or

(c) in the case of an arrangement to which section
165(3A) never applied but only if the time falls after
35the member’s drawdown pension fund in respect of
the arrangement is converted into the member’s flexi-
access drawdown fund in respect of the arrangement
by the operation of any of paragraphs 8B to 8D of
Schedule 28, 80% of the maximum amount that could
40have been paid in accordance with pension rule 5 in
the drawdown pension year in which the conversion
occurs had no conversion happened in that year by
the operation of any of paragraphs 8B to 8D of
Schedule 28.”

(2) 45The amendments made by sub-paragraph (1) come into force on 6 April
2015.

29 In paragraph 29(3) of Schedule 36 (modifications of paragraph 3 of Schedule
29 for cases involving protected lump sum rights), in the sub-paragraph

(5)(a) treated as substituted in paragraph 3 of Schedule 29, after “member’s
drawdown pension fund” insert “or flexi-access drawdown fund”.

Related amendment in the Pension Benefits Regulations 2006

30 (1) In regulation 2(1) of the Pension Benefits (Insurance Company Liable as
5Scheme Administrator) Regulations 2006 (S.I. 2006/136S.I. 2006/136) (payments in
relation to which the insurance company is liable as scheme
administrator)—

(a) omit the “or” at the end of sub-paragraph (b), and

(b) after sub-paragraph (c) insert “, or

“(d) 10a flexi-access drawdown fund lump sum death benefit.”

(2) The amendment made by sub-paragraph (1) is to be treated as having been
made by the Commissioners for Her Majesty’s Revenue and Customs in
exercise of their powers under section 273A of FA 2004 (as amended by this
Schedule).

15Related amendment in Part 9 of ITEPA 2003

31 In section 636A of ITEPA 2003 (taxation of pension lump sums)—

(a) in subsection (4) (lump sum taxable under section 206 of FA 2004 but
not otherwise) omit the “or” at the end of paragraph (b), and after
paragraph (c) insert “or

(d) 20a flexi-access drawdown fund lump sum death
benefit,”, and

(b) in subsection (7) (definitions) after ““drawdown pension fund lump
sum death benefit”,” insert—

• ““flexi-access drawdown fund lump sum death
  25benefit”,”.

Repeal and revocation of provisions relating to pre-6 April 2015 flexible drawdown

32 (1) In FA 2004 omit—

(a) in section 165(1), in pension rule 5, the second sentence,

(b) section 165(3A) and (3B),

(c) 30in section 167(1), in pension death benefit rule 4, the second sentence,

(d) section 167(2A) and (2B),

(e) in Schedule 28—

(i) paragraph 10(11),

(ii) paragraph 10A(11),

(iii) 35paragraphs 14A to 14E,

(iv) paragraph 24(11),

(v) paragraph 24A(9), and

(vi) paragraphs 24C to 24G, and

(f) in Schedule 34, paragraph 4A.

(2) 40In consequence of sub-paragraph (1), in Schedule 16 to FA 2011 omit
paragraphs 1(3), 8(12), 10, 11(3), 18(12), 20 and 81(3).

(3) The Registered Pension Schemes (Prescribed Requirements of Flexible
Drawdown Declaration) Regulations 2011 (S.I. 2011/1792S.I. 2011/1792) are revoked.

(4) The amendments made by sub-paragraphs (1) to (3) come into force on 6
April 2015.

Related amendments in regulations

33 (1) The Pension Schemes (Application of UK Provisions to Relevant Non-UK
5Schemes) Regulations 2006 (S.I. 2006/207S.I. 2006/207) are amended as follows.

(2) In regulations 6 and 7 omit paragraph (b) and the “and” preceding it.

(3) In regulation 14(3)—

(a) after paragraph (b) insert—

“(ba) paragraphs 8C and 8D (in each place where the
10expression occurs);”,

(b) omit paragraph (da),

(c) after paragraph (e) insert—

“(ea) paragraphs 22C and 22D (in each place where the
expression occurs);”, and

(d) 15omit paragraph (fc).

(4) The amendments made by sub-paragraphs (2) and (3) come into force on 6
April 2015.

(5) The amendments made by sub-paragraph (3)(a) and (c) are to be treated as
having been made by the Commissioners for Her Majesty’s Revenue and
20Customs under such of the powers conferred on them by Schedule 34 to FA
2004 (as amended by this Schedule) as are applicable.

34 (1) Regulation 12 of the Registered Pension Schemes (Transfer of Sums and
Assets) Regulations 2006 (S.I. 2006/499S.I. 2006/499) (drawdown funds—recognised
transfers) is amended as follows.

(2) 25In the heading after “fund” (in both places) insert “or flexi-access drawdown
fund”.

(3) In paragraph (1) (transfer recognised only if transferred items are only items
held under arrangement to which transfer made) after “represent a” insert
“member’s flexi-access drawdown fund, dependant’s flexi-access
30drawdown fund,”.

(4) In paragraph (2) (transferred items treated for certain purposes as remaining
held under fund from which transfer made) before sub-paragraph (a)
insert—

“(za) in the case of a member’s flexi-access drawdown fund, in the
35entries in table 3 for provisions not in Schedule 28,”.

(5) In table 3, in the heading, after “Prescribed purposes—” insert “member’s
flexi-access drawdown fund or”.

(6) In table 3 omit the entry for section 165(3A) of FA 2004.

(7) In table 4 omit the entry for section 167(2A) of FA 2004.

(8) 40The amendments made by this paragraph—

(a) come into force on 6 April 2015, and

(b) are to be treated as having been made by the Commissioners for
Revenue and Customs under the powers to make regulations

conferred by section 169(1D) and (1E) of FA 2004 (as amended by this
Schedule).

35 (1) The Registered Pension Schemes (Provision of Information) Regulations
2006 (S.I. 2006/567S.I. 2006/567) are amended as follows.

(2) 5In the table in regulation 3(1), omit the entry for reportable event 21
(reporting that section 165(3A) or 167(2A) of FA 2004 applies).

(3) Omit regulation 5B (reports for the tax year 2011-12).

(4) In regulation 16(1) (information for insurance company provided with
funds otherwise than from a drawdown pension fund) after “drawdown
10pension fund” insert “or flexi-access drawdown fund”.

(5) In regulation 17(1) (information for insurance company provided with
funds from a drawdown pension fund) after “drawdown pension fund”
insert “or flexi-access drawdown fund”.

(6) In regulation 17(2) and (4) after “of the member’s drawdown pension fund”
15insert “or of the member’s flexi-access drawdown fund”.

(7) The amendments made by sub-paragraphs (4) to (6) are to be treated as
having been made by the Commissioners for Her Majesty’s Revenue and
Customs under such of the powers cited in the instrument containing the
Regulations as are applicable.

(8) 20In consequence of sub-paragraph (2), omit regulation 4(9) of the Registered
Pension Schemes (Provision of Information) (Amendment) (No. 2)
Regulations 2011 (S.I. 2011/1797S.I. 2011/1797).

(9) In consequence of sub-paragraph (3), omit regulation 5 of those 2011
Regulations.

(10) 25The amendments made by sub-paragraphs (2) and (8) have effect in relation
to reports for the tax year 2015-16 and subsequent tax years.

(11) The amendments made by sub-paragraphs (3) and (9) come into force on 6
April 2015 but without prejudice to the continued operation of the revoked
provisions in relation to reports for the tax year 2011-12.

(12) 30The amendments made by sub-paragraphs (4) to (6) come into force on 6
April 2015.

Part 2 Annuities

Reduction of restrictions on new annuities

36 35Schedule 28 to FA 2004 (registered pension schemes) is amended as follows.

37 In paragraph 3 (definition of member’s lifetime annuity) after sub-
paragraph (1) insert—

“(1A) For the purposes of this Part, but subject to any provision made
under sub-paragraph (2C)(za), an annuity payable to the member
40is also a lifetime annuity if—

(a) it is payable by an insurance company,

(b) the member becomes entitled to it on or after 6 April 2015,
and

(c) it is payable until the member’s death or until the later of
the member’s death and the end of a term certain.”

38 5In paragraph 6 (definition of member’s short-term annuity) after sub-
paragraph (1) insert—

“(1ZA) For the purposes of this Part, but subject to any provision made
under sub-paragraph (1C)(za), an annuity payable to the member
is also a short-term annuity if—

(a) 10it is purchased by the application of sums or assets
representing the whole or any part of the member’s
drawdown pension fund, or of the member’s flexi-access
drawdown fund, in respect of an arrangement,

(b) it is payable by an insurance company,

(c) 15the member becomes entitled to it on or after 6 April 2015,
and

(d) it is payable for a term which does not exceed five years.”

39 In paragraph 17 (definition of dependants’ annuity) after sub-paragraph (1)
insert—

“(1ZA) 20For the purposes of this Part, but subject to any provision made
under sub-paragraph (4)(za), an annuity payable to a dependant is
also a dependants’ annuity if—

(a) either—

(i) it is purchased together with a lifetime annuity
25payable to the member and the member becomes
entitled to that lifetime annuity on or after 6 April
2015, or

(ii) it is purchased after the member’s death and the
dependant becomes entitled to it on or after 6 April
302015,

(b) it is payable by an insurance company,

(c) where the dependant is not the member’s child, it is
payable until the dependant’s death or until the earliest of
the dependant’s marrying, entering into a civil partnership
35or dying, and

(d) where the dependant is the member’s child, it is payable
until the earlier of the dependant’s ceasing to be a
dependant or dying, or until the earliest of the dependant’s
marrying, entering into a civil partnership, ceasing to be a
40dependant or dying.”

40 In paragraph 20 (definition of dependants’ short-term annuity) after sub-
paragraph (1) insert—

“(1ZA) For the purposes of this Part, but subject to any provision made
under sub-paragraph (1C)(za), an annuity payable to a dependant
45is also a dependants’ short-term annuity if—

(a) it is purchased by the application of sums or assets
representing the whole or any part of the dependant’s
drawdown pension fund, or of the dependant’s flexi-
access drawdown fund, in respect of an arrangement,

(b) it is payable by an insurance company,

(c) the dependant becomes entitled to it on or after 6 April
2015, and

(d) it is payable for a term which does not exceed five years
5and ends before the dependant dies.”

Further annuities amendments

41 In section 165(1) of FA 2004 (the pension rules) in pension rule 2 (death of a
member)—

(a) in the first sentence after “an annuity,” insert “and if in the case of an
10annuity that day was before 6 April 2015,”,

(b) after that sentence insert—

“If the member becomes entitled to an annuity on or after 6
April 2015 and the annuity is payable until the later of the
member’s death and the end of a term certain, payment of the
15annuity may continue to be made (to any person) until the
end of that term.”, and

(c) in the final sentence for “But no other” substitute “Except as
provided by the preceding provisions of this rule, no”.

42 Schedule 28 to FA 2004 (registered pension schemes) is further amended as
20follows.

43 In paragraph 3(1) (definition of member’s lifetime annuity) after paragraph
(b) insert—

“(ba) the member becomes entitled to it before 6 April 2015,”.

44 (1) In paragraph 3(2C) (regulations for cases where lifetime annuity ceases and
25funds are transferred)—

(a) before paragraph (a) insert—

“(za) in a case where—

(i) a new annuity becomes payable,

(ii) the member becomes entitled to it on or
30after 6 April 2015,

(iii) it would be a lifetime annuity if any
provision made under this paragraph were
ignored,

(iv) the terms of the contract for it are such that
35there will or could be decreases in its
amount other than allowed decreases (see
sub-paragraph (2E)), and

(v) any other conditions prescribed by the
regulations are met,

40the new annuity is not a lifetime annuity for the
purposes of this Part,”, and

(b) in paragraph (b) for “any other case” substitute “a case other than one
where a new lifetime annuity becomes payable”.

(2) In paragraph 3 after sub-paragraph (2D) insert—

“(2E) 45In sub-paragraph (2C)(za)(iv) “allowed decreases” means
decreases from time to time allowed by regulations under sub-

paragraph (1)(d); and any such regulations are to be treated as
having effect for this purpose.”

45 In paragraph 6(1) (definition of member’s short-term annuity) after
paragraph (c) insert—

ERROR:This is very likely an error in markup in the FM document. Amendments generally should not occur nested in this manner [\t (ca)\tthe member becomes entitled to it before 6 April 2015,\xd3 . ]

46 (1) In paragraph 6(1C) (regulations for cases where short-term annuity ceases
and funds are transferred)—

(a) before paragraph (a) insert—

“(za) in a case where—

(i) 10a new annuity becomes payable,

(ii) the member becomes entitled to it on or
after 6 April 2015,

(iii) it would be a short-term annuity if any
provision made under this paragraph were
15ignored,

(iv) the terms of the contract for it are such that
there will or could be decreases in its
amount other than allowed decreases (see
sub-paragraph (1E)), and

(v) 20any other conditions prescribed by the
regulations are met,

the new annuity is not a short-term annuity for the
purposes of this Part,”, and

(b) in paragraph (b) for “any other case” substitute “a case other than one
25where a new short-term annuity becomes payable”.

(2) In paragraph 6 after sub-paragraph (1D) insert—

“(1E) In sub-paragraph (1C)(za)(iv) “allowed decreases” means
decreases from time to time allowed by regulations under sub-
paragraph (1)(e); and any such regulations are to be treated as
30having effect for this purpose.”

47 In paragraph 17(1) (definition of dependants’ annuity) for paragraph (za)
substitute—

“(za) either—

(i) it is purchased together with a lifetime annuity
35payable to the member and the member becomes
entitled to that lifetime annuity before 6 April 2015,
or

(ii) it is purchased after the member’s death and the
dependant becomes entitled to it before 6 April
402015,”.

48 In paragraph 17(1A) for “sub-paragraph (1)(za)” substitute “sub-paragraphs
(1)(za) and (1ZA)(a)”.

49 (1) In paragraph 17(4) (regulations for cases where dependants’ annuity ceases
and funds are transferred)—

(a) 45before paragraph (a) insert—

“(za) in a case where—

(i) a new annuity becomes payable,

(ii) the dependant becomes entitled to it on or
after 6 April 2015,

(iii) it would be a dependants’ annuity if any
provision made under this paragraph were
5ignored,

(iv) the terms of the contract for it are such that
there will or could be decreases in its
amount other than allowed decreases (see
sub-paragraph (6)), and

(v) 10any other conditions prescribed by the
regulations are met,

the new annuity is not a dependants’ annuity for
the purposes of this Part,”, and

(b) in paragraph (b) for “any other case” substitute “a case other than one
15where a new dependants’ annuity becomes payable”.

(2) In paragraph 17 after sub-paragraph (5) insert—

“(6) In sub-paragraph (4)(za)(iv) “allowed decreases” means decreases
from time to time allowed by regulations under sub-paragraph
(1)(c); and any such regulations are to be treated as having effect
20for this purpose.”

50 In paragraph 20(1) (definition of dependants’ short-term annuity) after
paragraph (c) insert—

“(ca) the dependant becomes entitled to it before 6 April 2015,”.

51 (1) In paragraph 20(1C) (regulations for cases where dependants’ short-term
25annuity ceases and funds are transferred)—

(a) before paragraph (a) insert—

“(za) in a case where—

(i) a new annuity becomes payable,

(ii) the dependant becomes entitled to it on or
30after 6 April 2015,

(iii) it would be a dependants’ short-term
annuity if any provision made under this
paragraph were ignored,

(iv) the terms of the contract for it are such that
35there will or could be decreases in its
amount other than allowed decreases (see
sub-paragraph (1E)), and

(v) any other conditions prescribed by the
regulations are met,

40the new annuity is not a dependants’ short-term
annuity for the purposes of this Part,”, and

(b) in paragraph (b) for “any other case” substitute “a case other than one
where a new dependants’ short-term annuity becomes payable”.

(2) In paragraph 20 after sub-paragraph (1D) insert—

“(1E) 45In sub-paragraph (1C)(za)(iv) “allowed decreases” means
decreases from time to time allowed by regulations under sub-
paragraph (1)(e); and any such regulations are to be treated as
having effect for this purpose.”

Consequential amendment

52 In Schedule 16 to FA 2011 (benefits under pension schemes) in each of
paragraphs 87 and 95 (entitlement to unsecured or alternatively secured
pension on 5 April 2011) for “the reference” substitute “a reference”.

5Part 3 Pension payments out of uncrystallised funds

Definitions etc

53 Part 4 of FA 2004 is amended as follows.

54 In section 166(1) (lump sums which may be paid by registered pension
10scheme) in the lump sum rule after paragraph (b) insert—

“(ba) an uncrystallised funds pension lump sum,”.

55 In section 166(2) (when a person becomes entitled to a lump sum under a
registered pension scheme) before the “and” at the end of paragraph (a)
insert—

“(aa) 15in the case of an uncrystallised funds pension lump sum,
immediately before it is paid,”.

56 In section 280(2) (index of defined expressions) after the entry for
“uncrystallised funds lump sum death benefit” insert—

57 In Schedule 29 (supplementary provision about authorised lump sums) after
paragraph 4 insert—

“Uncrystallised funds pension lump sum

4A (1) For the purposes of this Part a lump sum is an uncrystallised funds
25pension lump sum if—

(a) it is paid on or after 6 April 2015 in respect of a money
purchase arrangement,

(b) it is paid when all or part of the member’s lifetime
allowance is available,

(c) 30it is paid when the member has reached normal minimum
pension age (or the ill-health condition is met),

(d) it is not a pension commencement lump sum,

(e) it is not a lump sum that, for the purposes of Part 9 of
ITEPA 2003 (pension income), is treated by regulations
35under section 164(1)(f) and (2) as a trivial commutation
lump sum paid to the member,

(f) immediately before the member becomes entitled to it, the
sums or assets that are to be used to provide it—

(i) represent rights of the member under the scheme
40that are uncrystallised rights as defined by section
212(1) and (2), but