Session 2014 - 15
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, continued

 
 

Nominees and successors: further drawdown amendments

 

4          

In section 169(1D) (regulations about transfers of drawdown funds) after

 

paragraph (aa) (which is inserted by this Act) insert “or

 

(ab)    

a nominee’s flexi-access drawdown fund, or

 

(ac)    

a successor’s flexi-access drawdown fund,”.

 

5          

In section 172(1)(a) (assignment of rights or benefits) after “dependant” insert

 

“, nominee or successor”.

 

6          

In section 172A(1)(a) (surrender of rights or benefits) after “dependant” insert

 

“, nominee or successor”.

 

7          

In section 172A(5) (exceptions to provisions on surrender: entitlement to

 

benefits)—

 

(a)    

in paragraph (b) after “dependant” insert “, or nominee,”,

 

(b)    

after paragraph (b) insert—

 

“(ba)    

a surrender (or agreement to surrender) by a

 

dependant, nominee or successor of the member (“the

 

beneficiary”) in return for the conferring, on a

 

successor of the member, of an entitlement to benefits

 

after the beneficiary’s death,”, and

 

(c)    

in paragraph (c) for “or dependant” substitute “, dependant, nominee

 

or successor”.

 

8          

In section 172A(5A) (further provision on surrender exceptions)—

 

(a)    

after “dependant”, in the first place it occurs, insert “, or nominee,”,

 

and

 

(b)    

after “dependant”, in the second place it occurs, insert “or nominee”.

 

9          

In section 172A after subsection (5A) insert—

 

“(5B)    

Subsection (5)(ba) applies only if the entitlement is held (or is to be

 

held) by the successor under an arrangement under the pension

 

scheme relating to the beneficiary or successor.”

 

10         

In section 172A(7) (exceptions to provisions on surrender: prospective

 

entitlements)—

 

(a)    

in the opening words after “dependant” insert “or nominee or

 

successor”, and

 

(b)    

in paragraph (a) after “dependant” insert “, or nominee or successor,”.

 

11         

In section 172B(2) (rights of a “relevant member”)—

 

(a)    

in paragraph (a) after “dependant” insert “or nominee or successor”,

 

and

 

(b)    

after paragraph (aa) insert—

 

“(ab)    

rights representing the nominee’s flexi-access

 

drawdown fund or successor’s flexi-access

 

drawdown fund in respect of an arrangement under

 

the pension scheme,”.

 

12         

In section 172B(7A) (section does not apply to certain increases in rights)

 

before “dependant’s drawdown pension fund” (in both places) insert

 

“nominee’s flexi-access drawdown fund, successor’s flexi-access drawdown

 

fund,”.

 

13         

In section 182(3) (value of arrangement for purposes of borrowing limits) after

 

paragraph (b) insert—

 

“(ba)    

the amount of such of the sums and the market value of such

 

of the assets as represent nominees’ flexi-access drawdown

 

funds in respect of the arrangement (if any),


 
 

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17

 

, continued

 
 

(bb)    

the amount of such of the sums and the market value of such

 

of the assets as represent successors’ flexi-access drawdown

 

funds in respect of the arrangement (if any),”.

 

14         

In section 280(2) (index of defined expressions) at the appropriate places

 

insert—

 

“dependant (of a member of a

paragraph 15 of Schedule 28”

 
 

registered pension scheme)

  
 

“nominee (of a member of a

paragraph 27A of Schedule 28”

 
 

registered pension scheme)

  
 

“nominees’ drawdown pension

paragraph 27B of Schedule 28”

 
 

“nominee’s flexi-access drawdown

paragraph 27E of Schedule 28”

 
 

fund

  
 

“nominees’ income withdrawal

paragraph 27D of Schedule 28”

 
 

“nominees’ short-term annuity

paragraph 27C of Schedule 28”

 
 

“successor (of a member of a

paragraph 27F of Schedule 28”

 
 

registered pension scheme)

  
 

“successors’ drawdown pension

paragraph 27G of Schedule 28”

 
 

“successor’s flexi-access

paragraph 27K of Schedule 28”

 
 

drawdown fund

  
 

“successors’ income withdrawal

paragraph 27J of Schedule 28”

 
 

“successors’ short-term annuity

paragraph 27H of Schedule 28”

 
 

Nomination of charities by nominees and successors of deceased scheme members

 

15  (1)  

Paragraph 18 of Schedule 29 (charity lump sum death benefit) is amended as

 

follows.

 

      (2)  

After sub-paragraph (2) insert—

 

  “(2A)  

A lump sum death benefit is also a charity lump sum death benefit

 

if—

 

(a)    

it is paid on the death of an individual who is—

 

(i)    

a nominee of the member, or

 

(ii)    

a successor of the member,

 

(b)    

there are no dependants of the member,

 

(c)    

it is paid in respect of the individual’s nominee’s flexi-

 

access drawdown fund or successor’s flexi-access

 

drawdown fund at the date of the individual’s death in

 

respect of an arrangement relating to the individual in the

 

capacity of a nominee or successor of the member, and

 

(d)    

it is paid to a charity nominated by the member or, if the

 

member made no nomination, by the individual.”

 

      (3)  

In sub-paragraph (3) (cases where lump sum exceeds the permitted maximum)

 

for “or (2)” substitute “, (2) or (2A)”.


 
 

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18

 

, continued

 
 

      (4)  

In sub-paragraph (4) (meaning of “permitted maximum”) after “arrangement”

 

insert “, or the nominee’s or successor’s flexi-access drawdown fund in respect

 

of the arrangement,”.

 

Related amendments in regulations

 

16  (1)  

Regulation 12 of the Registered Pension Schemes (Transfer of Sums and

 

Assets) Regulations 2006 (S.I. 2006/499) (drawdown funds—recognised

 

transfers) is amended as follows.

 

      (2)  

In the heading before “—recognised” insert “and nominee’s flexi-access

 

drawdown fund and successor’s flexi-access drawdown fund”.

 

      (3)  

In paragraph (1) (transfer recognised only if transferred items are only items

 

held under arrangement to which transfer made) before “member’s drawdown

 

pension fund” insert “nominee’s flexi-access drawdown fund, successor’s

 

flexi-access drawdown fund,”.

 

      (4)  

The 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 Her

 

Majesty’s Revenue and Customs under the powers to make

 

regulations conferred by section 169(1D) and (1E) of FA 2004 (as

 

amended by this Schedule).

 

Lump sum death benefits

 

Special lump sum death benefits charge

 

17  (1)  

Section 206 of FA 2004 (special lump sum death benefits charge) is amended

 

as follows.

 

      (2)  

After subsection (1) insert—

 

“(1ZA)    

In subsection (1) the reference to a member (and to the member’s

 

death) are to be read—

 

(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,


 
 

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19

 

, continued

 
 

(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.”

 

      (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—


 
 

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20

 

, continued

 
 

(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

 

(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.


 
 

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21

 

, continued

 
 

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.

 

(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.


 
 

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22

 

, continued

 
 

      (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.”

 

Income tax on beneficiaries’ income withdrawal

 

25  (1)  

ITEPA 2003 is amended as follows.


 
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Revised 21 November 2014