Finance Bill

House of Commons

Session 2003 - 04
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Finance Bill

Finance Bill
Part 4 — Pension schemes etc
Chapter 5 — Registered pension schemes: tax charges
175


PSLA is the standard lifetime allowance at the time of the previous benefit
crystallisation event.
(6)
Where more than one benefit crystallisation event occurs in relation to an
individual on the same day, it is for the individual to decide the order in which
they are to be treated as occurring for the purposes of this section; but this
5
subsection is subject to section 156(2) (entitlement to pension commencement
lump sum to arise immediately before entitlement to associated pension).
(7)
Where more than one benefit crystallisation event occurs by reason of the
payment of lump sum death benefits in respect of an individual the benefit
crystallisation events are to be treated for the purposes of this section as
10
occurring immediately before the individual’s death.
(8)
Paragraph 19 of Schedule 34 makes provision affecting this section in relation
to pre-commencement pensions.
209
Pension credits from previously crystallised rights
(1)
This section makes provision for the operation of a lifetime allowance
15
enhancement factor with respect to a benefit crystallisation event occurring in
relation to an individual where—
(a)
the individual has (at any time after 5th April 2006 but before the
benefit crystallisation event) acquired rights under a registered pension
scheme by reason of having become entitled to a pension credit,
20
(b)
the pension credit derived from the same or another registered pension
scheme, and
(c)
the rights under that registered pension scheme which became subject
to the corresponding pension debit consisted of or included rights to a
post-commencement pension in payment.
25
(2)
“Post-commencement pension in payment” means a pension to which a person
became (actually) entitled on or after 6th April 2006.
(3)
The lifetime allowance enhancement factor is the pension credit factor.
(4)
The pension credit factor is—
where—
30
APC is the amount which is the appropriate amount for the purposes of
section 29(1) of WRPA 1999 or Article 26(1) of WRP(NI)O 1999 in
relation to the pension credit, and
SLA is the standard lifetime allowance at the time when the rights were
acquired.
35
(5)
This section only applies if notice of intention to rely on it is given to the Inland
Revenue in accordance with regulations made by the Board of Inland Revenue.
210
Non-residence: general
(1)
This section makes provision for the operation of a lifetime allowance
enhancement factor with respect to a benefit crystallisation event occurring in
40
relation to an individual where, during any part of the period that is the active
membership period in relation to an arrangement relating to the individual

Finance Bill
Part 4 — Pension schemes etc
Chapter 5 — Registered pension schemes: tax charges
176

under a registered pension scheme, the individual is a relevant overseas
individual.
(2)
Section 211 provides the lifetime allowance enhancement factor in the case of
an arrangement that is a money purchase arrangement; and section 212
provides the lifetime allowance enhancement factor in the case of any other
5
arrangement.
(3)
For the purposes of this Part an individual is a relevant overseas individual at
any time if, at that time, the individual either is not a relevant UK individual
or—
(a)
is a relevant UK individual only by virtue of paragraph (c) of section
10
178(1) (individuals resident in UK at some time in previous five tax
years), and
(b)
is not employed by a person resident in the United Kingdom.
(4)
In this section and sections 211 and 212 “the active membership period”, in
relation to a benefit crystallisation event occurring in relation to an
15
arrangement relating to the individual, is the period—
(a)
beginning with the date on which the benefits first began to accrue to
or in respect of the individual under the arrangement or, if later, 6th
April 2006, and
(b)
ending immediately before the benefit crystallisation event.
20
(5)
But if benefits ceased to accrue to or in respect of the individual under the
arrangement before the benefit crystallisation event, the active membership
period is to be treated as having ended then.
(6)
This section only applies if notice of intention to rely on it is given to the Inland
Revenue in accordance with regulations made by the Board of Inland Revenue.
25
211
Non-residence: money purchase arrangements
(1)
This section applies in the case of an arrangement that is a money purchase
arrangement.
(2)
The lifetime allowance enhancement factor is—
(a)
if the arrangement is a cash balance arrangement, the cash balance
30
arrangement non-residence factor (see subsections (3) to (5)), and
(b)
if the arrangement is any other sort of money purchase arrangement,
the other money purchase arrangement non-residence factor (see
subsections (6) and (7)).
(3)
The cash balance arrangement non-residence factor is—
35
(a)
the factor arrived at by the application of subsection (4) in relation to
the part of the active membership period during which the individual
was a relevant overseas individual, or
(b)
if there have been two or more parts of that period during which the
individual was a relevant overseas individual, the aggregate of the
40
factors arrived at by the application of subsection (4) in relation to each
of those parts of that period.
(4)
The factor arrived at by the application of this subsection in relation to any part
of the active membership period is—

Finance Bill
Part 4 — Pension schemes etc
Chapter 5 — Registered pension schemes: tax charges
177

where—
CV is the closing value of the individual’s rights under the arrangement,
OV is the opening value of the individual’s rights under the arrangement,
and
SLA is the standard lifetime allowance at the time when that part of that
5
period ended.
(5)
For the purposes of subsection (4)—
(a)
the closing value of the individual’s rights under the arrangement is the
amount which would be available for the provision of benefits to or in
respect of the individual under the arrangement on the assumption that
10
the individual became entitled to the benefits at the end of that part of
that period, and
(b)
the opening value of the individual’s rights under the arrangement is
the amount which would be available for the provision of benefits to or
in respect of the individual under the arrangement on the assumption
15
that the individual became entitled to the benefits at the beginning of
that part of that period.
(6)
The other money purchase arrangement non-residence factor is—
(a)
the factor arrived at by the application of subsection (7) in relation to
the part of the active membership period during which the individual
20
was a relevant overseas individual, or
(b)
if there have been two or more parts of that period during which the
individual was a relevant overseas individual, the aggregate of the
factors arrived at by the application of subsection (7) in relation to each
of those parts of that period.
25
(7)
The factor arrived at by the application of this subsection in relation to any part
of the active membership period is—
where—
ROIC is the amount of the contributions made under the arrangement by
or in respect of the individual in any part of the active membership
30
period during which the individual is a relevant overseas individual,
and
SLA is the standard lifetime allowance at the time when that part of that
period ended.
212
Non-residence: other arrangements
35
(1)
This section applies in the case of an arrangement that is not a money purchase
arrangement.
(2)
The lifetime allowance enhancement factor is—
(a)
if the arrangement is a defined benefits arrangement, the defined
benefits arrangement non-residence factor (see subsections (3) and (4)),
40
and
(b)
if the arrangement is a hybrid arrangement, the hybrid arrangement
non-residence factor (see subsections (5) to (7)).
(3)
The defined benefits arrangement non-residence factor is—

Finance Bill
Part 4 — Pension schemes etc
Chapter 5 — Registered pension schemes: tax charges
178

(a)
the factor arrived at by the application of subsection (4) in relation to
the part of the active membership period during which the individual
was a relevant overseas individual, or
(b)
if there have been two or more parts of that period during which the
individual was a relevant overseas individual, the aggregate of the
5
factors arrived at by the application of subsection (4) in relation to each
of those parts of that period.
(4)
The factor arrived at by the application of this subsection in relation to any part
of the active membership period is—
where—
10
RVF is the relevant valuation factor (see section 263),
PE is the amount of the pension which would have been payable to the
individual under the arrangement if the individual had become
entitled to payment of it at the end of that part of that period,
LSE is the amount of the lump sum to which the individual would have
15
been entitled under the arrangement (otherwise than by commutation
of pension) if the individual had become entitled to payment of it at the
end of that part of that period,
PB is the amount of the pension which would have been payable to the
individual under the arrangement if the individual had become
20
entitled to payment of it at the beginning of that part of that period,
LSB is the amount of the lump sum to which the individual would have
been entitled under the arrangement (otherwise than by commutation
of pension) if the individual had become entitled to payment of it at the
beginning of that part of that period, and
25
SLA is the standard lifetime allowance at the time when that part of that
period ended.
(5)
The hybrid arrangement non-residence factor is the greater or greatest of such
of—
(a)
what would be the cash balance arrangement non-residence factor
30
(under section 211) if the arrangement were a cash balance
arrangement,
(b)
what would be the other money purchase arrangement non-residence
factor (under that section) if the arrangement were any other sort of
money purchase arrangement, and
35
(c)
what would be the defined benefits arrangement non-residence factor
(under subsections (3) and (4)) if the arrangement were a defined
benefits arrangement,

as are relevant factors in relation to the arrangement.
(6)
A factor is a relevant factor in relation to a hybrid arrangement if, in any
40
circumstances, the benefits that may be provided to or in respect of the
individual under the arrangement may be benefits linked to that factor.
(7)
For that purpose—
(a)
cash balance benefits are linked to the cash balance arrangement non-
residence factor,
45
(b)
other money purchase benefits are linked to the other money purchase
arrangement non-residence factor, and

Finance Bill
Part 4 — Pension schemes etc
Chapter 5 — Registered pension schemes: tax charges
179

(c)
defined benefits are linked to the defined benefits arrangement non-
residence factor.
213
Transfers from recognised overseas pension scheme: general
(1)
This section makes provision for the operation of a lifetime allowance
enhancement factor with respect to a benefit crystallisation event occurring in
5
relation to an individual where (at any time after 5th April 2006 but before the
benefit crystallisation event) there has been a recognised overseas scheme
transfer.
(2)
There is a “recognised overseas scheme transfer” if any sums or assets—
(a)
held for the purposes of an arrangement under a recognised overseas
10
pension scheme that is not a registered pension scheme, or
(b)
representing accrued rights under such an arrangement,

are transferred so as to become held for the purposes of, or to represent rights
under, an arrangement under a registered pension scheme relating to the
individual.
15
(3)
The arrangement specified in subsection (2)(a) or (b) is referred to in this
section and sections 214 and 215 as the “recognised overseas scheme
arrangement”.
(4)
The lifetime allowance enhancement factor is the recognised overseas scheme
transfer factor.
20
(5)
The recognised overseas scheme transfer factor is—
where—
AAT is the aggregate of the amount of any sums transferred, and the
market value of any assets transferred, on the recognised overseas
scheme transfer,
25
RRA is the relevant relievable amount, and
SLA is the standard lifetime allowance at the time when the recognised
overseas scheme transfer took place.
(6)
Section 214 specifies the relevant relievable amount in the case of a recognised
overseas scheme arrangement that was a money purchase arrangement; and
30
section 215 specifies the relevant relievable amount in the case of an recognised
overseas scheme arrangement that was any other sort of arrangement.
(7)
In this section and sections 214 and 215 “overseas arrangement active
membership period” is the period—
(a)
beginning with the date on which the benefits first began to accrue to
35
or in respect of the individual under the recognised overseas scheme
arrangement or, if later, 6th April 2006, and
(b)
ending immediately before the recognised overseas scheme transfer.
(8)
But if benefits ceased to accrue to or in respect of the individual under the
recognised overseas scheme arrangement before the recognised overseas
40
scheme transfer, the overseas arrangement active membership period is to be
treated as having ended then.
(9)
This section only applies if notice of intention to rely on it is given to the Inland
Revenue in accordance with regulations made by the Board of Inland Revenue.