Taxation of Pensions Bill (HL Bill 66)

(13) In paragraph (7), in the inserted paragraph 10(5), before the “and” at the end
of paragraph (a) insert—

“(aa) the referable portion of any previous uncrystallised funds
pension lump sum paid to or in respect of the member by
5a recognised overseas pension scheme;”.

(14) In paragraph (7), in the inserted paragraph 10(6), before the “and” at the end
of paragraph (a) insert—

“(aa) the referable portion of any earlier uncrystallised funds
pension lump sum to which the member became entitled
10under a relevant non-UK scheme since the paragraph 15
BCE occurred;”.

(15) After Part 3 insert—

““Part 4

18 Modifications to section 636A of ITEPA 2003 in respect of relevant
15non-UK schemes

Section 636A(1B) of the Income Tax (Earnings and Pensions) Act
2003 (income tax on uncrystallised funds pension lump sums under
registered pension schemes: meaning of “member’s available
lifetime allowance”) has effect in relation to relevant non-UK
20schemes as if the following provisions were inserted in section 636A
of that Act after subsection (1C)—

(1D) In determining the member’s available lifetime allowance for the
purposes of subsection (1B)—

(a) disregard any amount treated as crystallising by virtue of—

(i) 25benefit crystallisation event 8 (see section 216 of, and
Schedule 32 to, FA 2004), or

(ii) the benefit crystallisation event treated as occurring
by virtue of paragraph 15 of Schedule 34 to FA 2004
(“the paragraph 15 BCE”), and

(b) 30the amount of the allowance available is reduced by the
amount determined in accordance with subsection (1E) or
(1F), as the case may require.

(1E) Where benefit crystallisation event 8 has occurred, the member’s
available lifetime allowance is reduced by the aggregate of—

(a) 35the referable portion of any previous pension
commencement lump sum paid to or in respect of the
member by a recognised overseas pension scheme,

(b) the referable portion of any previous uncrystallised funds
pension lump sum paid to or in respect of the member by a
40recognised overseas pension scheme, and

(c) the referable portion of the amount which would have
crystallised by virtue of the member becoming entitled to a
pension, had the scheme paying it been a registered pension
scheme and disregarding paragraph 2 of Schedule 32 to FA
452004;

and in this subsection “referable portion” means portion referable to
the member’s relevant transfer fund (within the meaning given by
paragraph 4 of Schedule 34 to FA 2004).

(1F) Where the paragraph 15 BCE has occurred, the member’s available
lifetime allowance is reduced by the aggregate of—

(a) the referable portion of any earlier pension commencement
lump sum to which the member became entitled under a
5relevant non-UK scheme since the paragraph 15 BCE
occurred,

(b) the referable portion of any earlier uncrystallised funds
pension lump sum to which the member became entitled
under a relevant non-UK scheme since the paragraph 15 BCE
10occurred, and

(c) in respect of any pension to which the member has become
entitled since the paragraph 15 BCE occurred, the referable
portion of the amount which would have crystallised by
virtue of the member’s becoming entitled to the pension, had
15the scheme paying it been a registered pension scheme and
disregarding paragraph 2 of Schedule 32 to FA 2004;

and in this subsection “referable portion” means portion referable to
the member’s UK tax-relieved fund (within the meaning given by
paragraph 3 of Schedule 34 to FA 2004).

(1G) 20In subsections (1E) and (1F)—

• “recognised overseas pension scheme” and “pension” have the
  same meaning as in Part 4 of FA 2004 (see section 280(2) of FA
  2004), and

• “relevant non-UK scheme” has the same meaning as in
  25Schedule 34 to FA 2004 (see paragraph 1 of that Schedule).””

(16) The amendments made by this paragraph—

(a) have effect in relation to lump sums paid on or after 6 April 2015, and

(b) are to be treated as having been made by the Commissioners for Her
Majesty’s Revenue and Customs under such of the powers conferred
30on them by Schedule 34 to FA 2004 (as amended by this Schedule) as
are applicable.

97 (1) In this paragraph—

• “the 2013 Regulations” means the Registered Pension Schemes and
  Overseas Pension Schemes (Miscellaneous Amendments)
  35Regulations 2013 (S.I. 2013/2259S.I. 2013/2259), and

• “the 2006 Regulations” means the Pension Schemes (Information
  Requirements for Qualifying Overseas Pension Schemes, Qualifying
  Recognised Overseas Pension Schemes and Corresponding Relief)
  Regulations 2006 (S.I. 2006/208S.I. 2006/208).

(2) 40In regulation 3 of the 2013 Regulations (paragraph 3(1A) of the 2006
Regulations has effect in relation to 5-year periods ending on or after 1 April
2015) for “1st April 2015” substitute “6 April 2016”.

(3) In regulation 3(1C)(a) of the 2006 Regulations (transitional modification of
the time limit in regulation 3(1A)) for “1st April 2010” substitute “6 April
452011”.

Section 3

SCHEDULE 2 Death of pension scheme member

Part 1 Death benefits: Nominees and successors

5Drawdown benefits for nominees and successors of deceased scheme members

1 FA 2004 is amended as follows.

2 (1) Section 167 (the pension death benefit rules) is amended as follows.

(2) In pension death benefit rule 1 (pension death benefit may be paid only to
dependant of deceased member) after “dependant” insert “, or nominee or
10successor,”.

(3) After pension death benefit rule 3 (pension death benefits which may be
paid under a money purchase arrangement to a dependant) insert—

“Pension death benefit rule 3A

No payment of pension death benefit, other than nominees’
15drawdown pension in respect of a money purchase arrangement,
may be made to a nominee of the member.

Pension death benefit rule 3B”

(4) After subsection (1) insert—

“(1A) For the purposes of this Part, a person becomes entitled to
20dependants’ income withdrawal, nominees’ income withdrawal or
successors’ income withdrawal under a registered pension scheme
whenever sums or assets held for the purposes of an arrangement
under the pension scheme are designated as available for the
payment of (as the case may be) dependants’ drawdown pension,
25nominees’ drawdown pension or successors’ drawdown pension.”

(5) In subsection (2) (meaning of “pension death benefit”) after “see section
165)” insert “, or a pension payable in respect of the member on the
subsequent death of a dependant, nominee or successor of the member”.

3 (1) In Part 2 of Schedule 28 (interpretation of the pension death benefit rules) at
30the end insert—

“Meaning of “nominee”

27A (1) “Nominee of the member” means an individual—

(a) nominated by the member, or

(b) nominated by the scheme administrator,

35who is not a dependant of the member, but see sub-paragraph (2).

(2) In relation to any particular benefits under an arrangement, no
individual nominated by the scheme administrator counts as a
nominee of the member at any time when there is—

(a) a dependant of the member, or

(b) an individual, or charity, nominated by the member in
relation to the benefits.

(3) The reference in sub-paragraph (2)(b) to being nominated in
5relation to particular benefits under an arrangement includes—

(a) a reference to being nominated in relation to the scheme,

(b) a reference to being nominated in relation to arrangements
that include the arrangement,

(c) a reference to being nominated in relation to the
10arrangement, and

(d) a reference to being nominated in relation to benefits that
include the particular benefits.

Nominees’ drawdown pension

27B “Nominees’ drawdown pension” means—

(a) 15a nominees’ short-term annuity, or

(b) nominees’ income withdrawal.

Nominees’ short-term annuity

27C (1) For the purposes of this Part an annuity payable to a nominee is a
nominees’ short-term annuity if—

(a) 20it is purchased by the application of sums or assets
representing the whole or any part of the nominee’s flexi-
access drawdown fund in respect of an arrangement,

(b) it is payable by an insurance company,

(c) the nominee becomes entitled to it on or after 6 April 2015,
25and

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

(2) The Commissioners for Her Majesty’s Revenue and Customs may
by regulations make provision in relation to cases in which a
30nominees’ short-term annuity payable to a person (“the original
nominees’ short-term annuity”) ceases to be payable and in
consequence of that—

(a) sums or assets (or both) are transferred from the insurance
company to another insurance company and are applied—

(i) 35towards the provision of another nominees’ short-
term annuity (a “new nominees’ short-term
annuity”) by the other insurance company, or

(ii) otherwise, or

(b) sums or assets are transferred to the relevant registered
40pension scheme.

(3) The regulations may provide that—

(a) in a case where a new nominees’ short-term annuity
becomes payable, the new nominees’ short-term annuity is
to be treated, to such extent as is prescribed by the
45regulations and for such of the purposes of this Part as are

so prescribed, as if it were the original nominees’ short-
term annuity, and

(b) in any other case, the relevant registered pension scheme is
to be treated as making an unauthorised payment in
5respect of the member of an amount equal to the aggregate
of the sums, and the market value of the assets, transferred.

(4) For the purposes of sub-paragraphs (2) and (3) a registered
pension scheme is the relevant registered pension scheme if the
original nominees’ short-term annuity was acquired using sums
10or assets held for the purposes of the pension scheme.

Nominees’ income withdrawal

27D “Nominees’ income withdrawal” means an amount (other than an
annuity) which the nominee is entitled to be paid from the
nominee’s flexi-access drawdown fund in respect of an
15arrangement.

Nominee’s flexi-access drawdown fund

27E (1) For the purposes of this Part a nominee’s flexi-access drawdown
fund in respect of an arrangement consists of such of the sums or
assets held for the purposes of the arrangement as are newly-
20designated nominee funds.

(2) For the purposes of this Part sums or assets held for the purposes
of an arrangement are newly-designated nominee funds if—

(a) they—

(i) have, at any time on or after 6 April 2015, been
25designated under the arrangement as available for
the payment of nominees’ drawdown pension, and

(ii) were, immediately before being so designated,
unused drawdown funds or unused uncrystallised
funds, or

(b) 30they arise, or (directly or indirectly) derive, from newly-
designated nominee funds under paragraph (a) or from
sums or assets which so arise or derive.

(3) Sums or assets held for the purposes of an arrangement after the
member’s death are unused drawdown funds if—

(a) 35immediately before the member’s death, they were held
for the purposes of the arrangement and represented
(whether alone or with other sums or assets) the member’s
flexi-access drawdown fund, or drawdown pension fund,
in respect of the arrangement, or

(b) 40they arise, or (directly or indirectly) derive, from unused
drawdown funds under paragraph (a) or from sums or
assets which so arise or derive.

(4) In the case of a cash balance arrangement, sums or assets held for
the purposes of the arrangement after the member’s death are
45unused uncrystallised funds if—

(a) they represent the whole or any part of the sum that would
have been available immediately before the member’s

death for the provision of benefits to or in respect of the
member if entitlement had arisen immediately before the
member’s death to all benefits under the arrangement to
which entitlement had not previously arisen, and

(b) 5since the member’s death they have not been designated as
available for the payment of dependants’ drawdown
pension, not been designated as available for the payment
of nominees’ drawdown pension, not been applied
towards the provision of a dependants’ annuity and not
10been applied towards the provision of a dependants’
scheme pension.

(5) In the case of any other money purchase arrangement, sums or
assets held for the purposes of the arrangement after the member’s
death are unused uncrystallised funds if—

(a) 15immediately before the member’s death they were held for
the purposes of the arrangement and at that time—

(i) were not member-designated funds,

(ii) were not newly-designated funds,

(iii) had not been applied towards the provision of a
20scheme pension, and

(iv) had not been applied towards the provision of a
dependants’ scheme pension, or

(b) they arise, or (directly or indirectly) derive, from unused
uncrystallised funds under paragraph (a) or from sums or
25assets which so arise or derive,

and since the member’s death they have not been designated as
available for the payment of dependants’ drawdown pension, not
been designated as available for the payment of nominees’
drawdown pension, not been applied toward the provision of a
30dependants’ annuity and not been applied toward the provision
of a dependants’ scheme pension.

Meaning of “successor”

27F (1) “Successor of the member” means an individual—

(a) nominated by a dependant of the member,

(b) 35nominated by a nominee of the member,

(c) nominated by a successor of the member, or

(d) nominated by the scheme administrator,

but see sub-paragraph (2).

(2) In relation to any particular benefits under an arrangement
40relating to a dependant, nominee or successor of the member (“the
beneficiary”) in that capacity, no individual nominated by the
scheme administrator counts as a successor of the member at any
time after the beneficiary’s death when there is an individual, or
charity, nominated by the beneficiary in relation to the benefits.

(3) 45A reference in sub-paragraph (2) to being nominated in relation to
particular benefits under an arrangement includes—

(a) a reference to being nominated in relation to the scheme,

(b) a reference to being nominated in relation to arrangements
that include the arrangement,

(c) a reference to being nominated in relation to the
arrangement, and

(d) a reference to being nominated in relation to benefits that
include the particular benefits.

(4) 5Where a successor of the member is an individual who is also a
dependant of the member, the individual in the capacity of a
successor of the member is to be treated as not also being a
dependant of the member.

Successors’ drawdown pension

27G 10“Successors’ drawdown pension” means—

(a) a successors’ short-term annuity, or

(b) successors’ income withdrawal.

Successors’ short-term annuity

27H (1) For the purposes of this Part an annuity payable to a successor is a
15successors’ short-term annuity if—

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

(b) it is payable by an insurance company,

(c) 20the successor becomes entitled to it on or after 6 April 2015,
and

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

(2) The Commissioners for Her Majesty’s Revenue and Customs may
25by regulations make provision in relation to cases in which a
successors’ short-term annuity payable to a person (“the original
successors’ short-term annuity”) ceases to be payable and in
consequence of that—

(a) sums or assets (or both) are transferred from the insurance
30company to another insurance company and are applied—

(i) towards the provision of another successors’ short-
term annuity (a “new successors’ short-term
annuity”) by the other insurance company, or

(ii) otherwise, or

(b) 35sums or assets are transferred to the relevant registered
pension scheme.

(3) The regulations may provide that—

(a) in a case where a new successors’ short-term annuity
becomes payable, the new successors’ short-term annuity
40is to be treated, to such extent as is prescribed by the
regulations and for such of the purposes of this Part as are
so prescribed, as if it were the original successors’ short-
term annuity, and

(b) in any other case, the relevant registered pension scheme is
45to be treated as making an unauthorised payment in
respect of the member of an amount equal to the aggregate
of the sums, and the market value of the assets, transferred.

(4) For the purposes of sub-paragraphs (2) and (3) a registered
pension scheme is the relevant registered pension scheme if the
original successors’ short-term annuity was acquired using sums
or assets held for the purposes of the pension scheme.

5Successors’ income withdrawal

27J “Successors’ income withdrawal” means an amount (other than an
annuity) which the successor is entitled to be paid from the
successor’s flexi-access drawdown fund in respect of an
arrangement.

10Successor’s flexi-access drawdown fund

27K (1) For the purposes of this Part a successor’s flexi-access drawdown
fund in respect of an arrangement consists of such of the sums or
assets held for the purposes of the arrangement as are newly-
designated successor funds.

(2) 15For the purposes of this Part sums or assets held for the purposes
of an arrangement are newly-designated successor funds if—

(a) they—

(i) have, at any time on or after 6 April 2015, been
designated under the arrangement as available for
20the payment of successors’ drawdown pension,
and

(ii) were, immediately before being so designated,
unused drawdown funds of the same deceased
dependant, nominee or successor of the member,
25or

(b) they arise, or (directly or indirectly) derive, from newly-
designated successor funds under paragraph (a) or from
sums or assets which so arise or derive.

(3) Sums or assets held for the purposes of an arrangement after the
30death of a dependant, nominee or successor (“the beneficiary”) are
unused drawdown funds of the beneficiary’s if—

(a) immediately before the beneficiary’s death, they were held
for the purposes of the arrangement and represented
(whether alone or with other sums or assets) the
35beneficiary’s—

(i) dependant’s flexi-access drawdown fund,

(ii) dependant’s drawdown pension fund,

(iii) nominee’s flexi-access drawdown fund, or

(iv) successor’s flexi-access drawdown fund,

40in respect of the arrangement, or

(b) they arise, or (directly or indirectly) derive, from unused
drawdown funds of the beneficiary’s under paragraph (a)
or from sums or assets which so arise or derive.”

(2) The provisions inserted by sub-paragraph (1) have effect even in relation to
45cases where the member concerned, or any dependant concerned, dies
before 6 April 2015.

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) 5a 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 10In 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
15dependant, 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,
20nominee 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 25In 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
30entitlements)—

(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 35In 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
40drawdown 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
45“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
5funds in respect of the arrangement (if any),

(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
10insert—

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) 30After 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) 35a 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