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Registered pension schemes: authorised pensions—supplementary |
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Defined benefits and money purchase arrangements |
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1 | For the purposes of this Part the ill-health condition is met if— |
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(a) | the scheme administrator has received evidence from a registered |
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medical practitioner that the member is (and will continue to be) |
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incapable of carrying on the member’s occupation because of |
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physical or mental impairment, and |
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(b) | the member has in fact ceased to carry on the member’s occupation. |
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2 (1) | In the case of a pension scheme with fewer than 50 members, a pension |
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payable to the member is a scheme pension for the purposes of this Part if— |
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(a) | it is payable by an insurance company selected by the scheme |
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administrator or, where the scheme administrator is an insurance |
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company, by the scheme administrator, and |
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(b) | it satisfies the condition in sub-paragraph (3). |
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(2) | In the case of a pension scheme with 50 or more members, a pension payable |
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to the member is a scheme pension for the purposes of this Part if— |
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(a) | it is payable by the scheme administrator or by an insurance |
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company selected by the scheme administrator, and |
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(b) | it satisfies the condition in sub-paragraph (3). |
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(3) | The condition is that— |
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(a) | the pension is payable (at least annually) until the member’s death or |
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until the later of the member’s death and the end of a term certain not |
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(b) | the rate of pension payable in respect of any relevant 12 month |
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period is (except in excluded circumstances) not less than the rate |
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payable in respect of the previous 12 month period. |
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(4) | But if the ill-health condition is met when the member becomes entitled to |
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the pension, the pension may cease to be payable on the scheme |
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administrator’s receiving evidence from a registered medical practitioner |
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that the member is again capable of carrying on the member’s occupation. |
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(5) | A pension is payable until the end of a term certain even if it may, after the |
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death of the member during the term, end on the pensioner— |
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(b) | reaching the age of 18, or |
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(c) | ceasing to be in full-time education. |
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(6) | A relevant 12 month period is any 12 month period which— |
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(a) | begins on or after the first anniversary of the day on which the |
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member becomes entitled to the pension, and |
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(b) | ends before the day on which the pension ceases to be payable. |
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(7) | “Excluded circumstances” means that the reduced rate applies to all the |
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scheme pensions being paid to or in respect of members of the pension |
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Money purchase arrangements |
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3 (1) | For the purposes of this Part an annuity payable to the member is a lifetime |
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(a) | it is payable by an insurance company, |
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(b) | the member had an opportunity to select the insurance company, |
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(c) | it is payable until the member’s death or until the later of the |
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member’s death and the end of a term certain not exceeding ten |
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(d) | it is a level annuity, an increasing annuity or a relevant linked |
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(2) | An annuity is payable until the end of a term certain even if it may, after the |
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death of the member during the term, end on the annuitant— |
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(b) | reaching the age of 18, or |
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(c) | ceasing to be in full-time education. |
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(3) | An annuity is a level annuity if its amount does not vary from year to year. |
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(4) | An annuity is an increasing annuity if its amount increases from year to year. |
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(5) | An annuity is a relevant linked annuity if its amount varies from year to year |
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but only in line with changes in (or by an amount which does not exceed the |
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amount by which it would vary if it varied in line with changes in)— |
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(a) | the retail prices index, |
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(b) | the market value of freely marketable assets, or |
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(c) | an index reflecting the market value of freely marketable assets. |
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(6) | “Freely marketable assets” means assets which are sold on the open market |
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at a price not determined by the member. |
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Unsecured pension and alternatively secured pension |
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4 | “Unsecured pension” means— |
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(a) | a short-term annuity, or |
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5 | “Alternatively secured pension” means income withdrawal. |
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6 (1) | An annuity payable to the member is a short-term annuity if— |
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(a) | it is purchased by the application of sums or assets representing the |
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whole or any part of the member’s unsecured pension fund in |
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respect of an arrangement, |
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(b) | it is payable by an insurance company, |
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(c) | the member had an opportunity to select the insurance company, |
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(d) | it is payable for a term which does not exceed five years and ends |
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before the member reaches the age of 75, and |
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(e) | it is either a level annuity, an increasing annuity or a relevant linked |
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(2) | “Level annuity”, “increasing annuity” and “relevant linked annuity” have |
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the same meaning as in paragraph 3. |
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7 | “Income withdrawal” means— |
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(a) | if the member has not reached the age of 75, an amount (other than a |
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payment of an annuity) which the member is entitled to be paid from |
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the member’s unsecured pension fund in respect of an arrangement, |
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(b) | if the member has reached the age of 75, an amount which the |
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member is entitled to be paid from the member’s alternatively |
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secured pension fund in respect of an arrangement. |
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Member’s unsecured pension fund |
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8 (1) | For the purposes of this Part the member’s unsecured pension fund in |
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respect of an arrangement consists of such of the sums or assets held for the |
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purposes of the arrangement— |
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(a) | as have at any time been designated under the arrangement as |
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available for the payment of unsecured pension, and |
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(b) | have not been applied for purchasing a scheme pension, a lifetime |
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annuity or a short-term annuity or paid as income withdrawal. |
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(2) | When the member reaches the age of 75, any relevant uncrystallised funds |
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are to be treated as having been designated under the arrangement as |
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available for the payment of unsecured pension immediately before the |
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(3) | “Relevant uncrystallised funds” means the sums and assets held for the |
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purposes of the arrangement which— |
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(a) | have not been applied for purchasing a scheme pension, a lifetime |
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annuity, a dependants’ scheme pension or a dependants’ annuity, |
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(b) | have not previously been designated under the arrangement as |
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available for the payment of unsecured pension. |
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Unsecured pension year and basis amount for unsecured pension year |
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9 (1) | “Unsecured pension year” means— |
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(a) | the period of 12 months beginning with the day on which the |
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member first becomes entitled to unsecured pension in respect of the |
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(b) | each succeeding period of 12 months. |
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(2) | But when the member reaches the age of 75 or dies before reaching that age, |
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the current unsecured pension year is the last unsecured pension year and |
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ends immediately before the member’s death or 75th birthday. |
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10 (1) | The period of five unsecured pension years beginning with the first |
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unsecured pension year, and each succeeding period of five unsecured |
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pension years, is a “reference period”; and the first day of each reference |
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period is, in relation to that period, “the reference date”. |
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(2) | For the first unsecured pension year falling within a reference period, the |
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basis amount is the annual amount of the relevant annuity which could have |
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been purchased by the application of the sums and assets representing the |
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member’s unsecured pension fund on the nominated date (but subject to |
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(3) | “The nominated date”— |
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(a) | in relation to the first reference period, is the reference date, and |
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(b) | in relation to any subsequent reference period, is such day, within |
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the period of 60 days ending with the reference date, as is nominated |
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by the scheme administrator (or, if no day is nominated by the |
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scheme administrator, is the reference date). |
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(4) | For each other unsecured pension year falling within a reference period, the |
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basis amount is the annual amount of the relevant annuity which could have |
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been purchased by the application of the sums and assets representing the |
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member’s unsecured pension fund— |
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(a) | if there has been no recent annuity purchase or recent additional |
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fund designation, on the nominated date, and |
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(b) | otherwise, immediately after the last annuity purchase or additional |
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| (but subject to sub-paragraph (5)). |
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(5) | On the occasion of each additional fund designation during an unsecured |
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pension year, the basis amount for that unsecured pension year is to be |
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recalculated in accordance with sub-paragraph (6). |
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(6) | The basis amount for the unsecured pension year is the annual amount of |
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the relevant annuity which could have been purchased by the application of |
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the sums and assets representing the member’s unsecured pension fund |
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immediately after the additional fund designation. |
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(7) | “Annuity purchase” means the purchase of a scheme pension or a lifetime |
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annuity by the application of sums or assets representing the whole or part |
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of the member’s unsecured pension fund. |
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(8) | “Additional fund designation” means the designation under the |
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arrangement of further sums or assets held for the purposes of the |
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arrangement as available for the payment of unsecured pension. |
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(9) | An annuity purchase or additional fund designation is “recent” if it took |
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(a) | beginning with the reference date, and |
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(b) | ending with the last day of the immediately preceding unsecured |
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(10) | Paragraph 14 defines “relevant annuity”. |
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Member’s alternatively secured pension fund |
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11 (1) | For the purposes of this Part the member’s alternatively secured pension |
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fund in respect of an arrangement consists of such of the sums and assets |
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held for the purposes of the arrangement as— |
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(a) | meet condition A or condition B, and |
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(b) | have not been subsequently applied for purchasing a scheme |
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pension or a lifetime annuity or paid as income withdrawal. |
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(2) | Condition A is that the sums and assets were part of the member’s |
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unsecured pension fund in respect of the arrangement when the member |
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(3) | Condition B is that the sums and assets— |
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(a) | became held for the purposes of the arrangement after the member |
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reached the age of 75, or |
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(b) | if the arrangement is a relevant arrangement, have at any time since |
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the member reached that age been designated as available for the |
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payment of alternatively secured pension to the member. |
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(4) | A relevant arrangement is an arrangement which became a money purchase |
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arrangement after the member reached the age of 75 (having previously |
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been a hybrid arrangement under which, in certain circumstances, defined |
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Alternatively secured pension year and basis amount for alternatively secured pension year |
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12 (1) | “Alternatively secured pension year” means— |
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(a) | the period of 12 months beginning with the day on which the |
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member first becomes entitled to alternatively secured pension in |
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respect of the arrangement, and |
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(b) | each succeeding period of 12 months. |
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(2) | When the member dies, the current alternatively secured pension year is the |
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last alternatively secured pension year and ends immediately before the |
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(3) | But if by virtue of pension rule 2 alternatively secured income is to be paid |
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to a person after the member’s death, sub-paragraph (4) applies instead of |
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(4) | The last alternatively secured pension year is the earlier of— |
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(a) | the tenth alternatively secured pension year, and |
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(b) | the last alternatively secured pension year in which, under the |
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arrangement, alternatively secured pension is to be paid. |
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13 (1) | For the first alternatively secured pension year, the basis amount is the |
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annual amount of the relevant annuity which could have been purchased by |
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the application of the sums and assets representing the member’s |
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alternatively secured pension fund on the date on which the member first |
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became entitled to alternatively secured pension in respect of the |
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(2) | For each other alternatively secured pension year, the basis amount is the |
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annual amount of the relevant annuity which could have been purchased by |
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the application of the sums and assets representing the member’s |
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alternatively secured pension fund on the nominated date. |
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(3) | “The nominated date” is such day within the period of 60 days ending with |
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the first day of the alternatively secured pension year as is nominated by the |
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scheme administrator (or, if no day is nominated by the scheme |
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administrator, is the first day of the alternatively secured pension year). |
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(4) | Paragraph 14 defines “relevant annuity”. |
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14 (1) | A “relevant annuity” is an annuity of a description prescribed by regulations |
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made by the Board of Inland Revenue. |
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(2) | The annual amount of a relevant annuity is to be ascertained in accordance |
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with regulations made by the Board of Inland Revenue. |
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(3) | The regulations may in particular provide for the annual amount to be |
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ascertained by reference to— |
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(a) | comparative annuity tables published by the Financial Services |
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(b) | material published by any other person. |
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Pension death benefit rules |
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Defined benefits and money purchase arrangements |
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15 (1) | A person who was married to the member at the date of the member’s death |
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is a dependant of the member. |
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(2) | A child of the member is a dependant of the member if the child— |
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(a) | has not reached the age of 23, or |
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(b) | has reached that age and, in the opinion of the scheme administrator, |
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was at the date of the member’s death dependant on the member |
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because of physical or mental impairment. |
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(3) | A person who was not married to the member at the date of the member’s |
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death and is not a child of the member is a dependant of the member if, in |
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the opinion of the scheme administrator, at the date of the member’s death— |
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(a) | the person was financially dependant on the member, |
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(b) | the person’s financial relationship with the member was one of |
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(c) | the person was dependant on the member because of physical or |
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Dependants’ scheme pension |
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16 (1) | In the case of a pension scheme with fewer than 50 members, a pension |
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payable to a dependant is a dependants’ scheme pension for the purposes of |
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(a) | it is payable by an insurance company selected by the scheme |
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administrator or, where the scheme administrator is an insurance |
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company, by the scheme administrator, and |
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(b) | it satisfies the condition in sub-paragraph (3). |
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(2) | In the case of a pension scheme with 50 or more members, a pension payable |
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to a dependant is a dependants’ scheme pension if— |
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(a) | it is payable by the scheme administrator or by an insurance |
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company selected by the scheme administrator, and |
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(b) | it satisfies the condition in sub-paragraph (3). |
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(3) | The condition is that— |
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(a) | if the dependant is not the member’s child, the pension is payable |
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until the dependant’s death or until the earlier of the dependant’s |
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(b) | if the dependant is the member’s child, the pension is payable until |
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the earlier of the dependant’s ceasing to be a dependant or dying, or |
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until the earlier of the dependant’s marrying, ceasing to be a |
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(c) | the rate of pension payable in respect of any relevant 12 month |
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period is (except in excluded circumstances) not less than the rate |
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payable in respect of the previous 12 month period. |
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(4) | A relevant 12 month period is any 12 month period which— |
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(a) | begins on or after the first anniversary of the member’s death, and |
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(b) | ends before the day on which the pension ceases to be payable. |
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(5) | “Excluded circumstances” means that the reduced rate applies to all the |
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dependants’ scheme pensions being paid in respect of members of the |
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Money purchase arrangements |
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17 (1) | An annuity payable to a dependant is a dependants’ annuity if— |
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(a) | it is payable by an insurance company, |
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(b) | the member or dependant had an opportunity to select the insurance |
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(c) | it is a level annuity, an increasing annuity or a relevant linked |
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(d) | where the dependant is not the member’s child, it is payable until the |
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dependant’s death or until the earlier of the dependant’s marrying |
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(e) | where the dependant is the member’s child, it is payable until the |
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earlier of the dependant’s ceasing to be a dependant or dying, or |
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until the earlier of the dependant’s marrying, ceasing to be a |
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(2) | “Level annuity”, “increasing annuity” and “relevant linked annuity” have |
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the same meaning as in paragraph 3. |
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Dependants’ unsecured pension and dependants’ alternatively secured pension |
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18 | “Dependants’ unsecured pension” means— |
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(a) | a dependants’ short-term annuity, or |
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(b) | dependants’ income withdrawal. |
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19 | “Dependants’ alternatively secured pension” means dependants’ income |
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Dependants’ short-term annuity |
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20 (1) | An annuity payable to a dependant is a dependants’ short-term annuity if— |
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(a) | it is purchased by the application of sums or assets representing the |
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whole or any part of the dependant’s unsecured pension fund in |
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respect of an arrangement, |
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