Finance Bill

House of Commons

Session 2003 - 04
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Finance Bill

Finance Bill
Schedule 29 — Registered pension schemes: authorised lump sums—supplementary
Part 1 — Lump sum rule
434

(b)
the aggregate of the amounts crystallised on benefit crystallisation
events in the period beginning with 6th April 2006 and ending with
the nominated date, as adjusted under sub-paragraph (3).
      (2)
The adjustment referred to in sub-paragraph (1)(a) is the multiplication of
the value of the member’s pre-commencement pension rights on 5th April
5
2006 by—

where—
SLAN is the standard lifetime allowance on the nominated date, and
FSLA is £1,500,000 (the standard lifetime allowance for the tax year
2006-7).
10
      (3)
The adjustment referred to in sub-paragraph (1)(b) is the multiplication of
the amount crystallised by a previous benefit crystallisation event by—

where—
SLAN is the standard lifetime allowance on the nominated date, and
PSLA is the standard lifetime allowance when the previous benefit
15
crystallisation event occurred.
9     (1)
The value of the member’s uncrystallised rights on the nominated date is the
aggregate value of the member’s uncrystallised rights on that date under
each arrangement relating to the member under a registered pension
scheme.
20
      (2)
The value on the nominated date of the member’s uncrystallised rights
under such an arrangement is to be calculated in accordance with section 201
(valuation of uncrystallised rights for purposes of section 199).
Winding-up lump sum
10    (1)
A lump sum is a winding-up lump sum if—
25
(a)
the pension scheme is an occupational pension scheme,
(b)
the pension scheme is being wound-up,
(c)
the member’s employer meets the conditions in sub-paragraph (3),
(d)
it is paid when all or part of the amount that is the individual’s
lifetime allowance in relation to the member is available,
30
(e)
it extinguishes the member’s entitlement to benefits under the
pension scheme, and
(f)
it is paid when the member has not reached the age of 75.
      (2)
But if a lump sum falling within sub-paragraph (1) exceeds 1% of the
standard lifetime allowance when the lump sum is paid, the excess is not a
35
winding-up lump sum.
      (3)
The conditions are that the employer—
(a)
has made contributions under the pension scheme in respect of the
member,
(b)
is not making contributions under any other registered pension
40
scheme in respect of the member, and

Finance Bill
Schedule 29 — Registered pension schemes: authorised lump sums—supplementary
Part 2 — Lump sum death benefit rule
435

(c)
undertakes to the Inland Revenue not to make such contributions
during the period of one year beginning with the day on which the
lump sum is paid.
Lifetime allowance excess lump sum
11
For the purposes of this Part a lump sum is a lifetime allowance excess lump
5
sum if—
(a)
it is paid when none the member’s lifetime allowance is available,
(b)
it is not a short service refund lump sum or a refund of excess
contributions lump sum,
(c)
it does not reduce the rate of payment of any pension to which the
10
member has become (actually) entitled, or extinguish the member’s
entitlement to payment of any such pension,
(d)
it is paid when the member has reached normal minimum pension
age (or the ill-health condition is met), and
(e)
it is paid when the member has not reached the age of 75.
15
Interpretation of Part 1
12    (1)
Expressions used in this Part of this Schedule and in Schedule 28 have the
same meaning in this Part of this Schedule as in Schedule 28.
      (2)
If all or part of the member’s lifetime allowance is available immediately
before a lump sum is paid, any amount of the lump sum which exceeds the
20
member’s available lifetime allowance is to be treated as satisfying
paragraphs 1(1)(b), 4(1)(b), 7(1)(c) and 10(1)(d).
      (3)
Where by virtue of paragraph 1(2), 5(2), 6(2) or 10(2) an excess is not an
authorised lump sum of one description, that does not prevent the excess
being an authorised lump sum of another description; and sub-paragraph
25
(2) does not apply for the purposes of determining whether the excess is a
lump sum of another description.
      (4)
“Authorised lump sum” means a lump sum authorised to be paid by the
lump sum rule.
Part 2
30
Lump sum death benefit rule
Defined benefits arrangements
Defined benefits lump sum death benefit
13
For the purposes of this Part a lump sum death benefit is a defined benefits
lump sum death benefit if—
35
(a)
the member had not reached the age of 75 at the date of the member’s
death,
(b)
it is paid in respect of a defined benefits arrangement,
(c)
it is paid before the end of the period of two years beginning with the
day on which the member died, and
40
(d)
it is not a pension protection lump sum death benefit, trivial
commutation lump sum death benefit or winding-up lump sum
death benefit.

Finance Bill
Schedule 29 — Registered pension schemes: authorised lump sums—supplementary
Part 2 — Lump sum death benefit rule
436

Pension protection lump sum death benefit
14    (1)
For the purposes of this Part a lump sum death benefit is a pension
protection lump sum death benefit if—
(a)
the member had not reached the age of 75 at the date of the member’s
death,
5
(b)
it is paid in respect of a defined benefits arrangement,
(c)
it is paid in respect of a scheme pension to which the member was
entitled at the date of the member’s death, and
(d)
the member has specified that it is to be treated as a pension
protection lump sum death benefit (instead of a defined benefits
10
lump sum death benefit).
      (2)
But if the amount of a lump sum falling within sub-paragraph (1) exceeds
the pension protection limit, the excess is not a pension protection lump sum
death benefit.
      (3)
The pension protection limit is—
15

where—
AC is the amount crystallised by reason of the member becoming
entitled to the pension (see section 205),
AP is the amount of the pension paid in respect of the period between
the member becoming entitled to the pension and the member’s
20
death, and
TPLS is the total amount of pension protection lump sum death
benefit previously paid under this paragraph.
Money purchase arrangements
Uncrystallised funds lump sum death benefit
25
15    (1)
For the purposes of this Part a lump sum death benefit is an uncrystallised
funds lump sum death benefit if—
(a)
the member had not reached the age of 75 at the date of the member’s
death,
(b)
it is paid in respect of a money purchase arrangement,
30
(c)
it is paid before the end of the period of two years beginning with the
day on which the member died, and
(d)
it is paid in respect of relevant uncrystallised funds.
      (2)
“Relevant uncrystallised funds” means such of the sums and assets held for
the purposes of the arrangement at the member’s death as—
35
(a)
had not been applied for purchasing a scheme pension, a lifetime
annuity, a dependants’ scheme pension or a dependants’ annuity,
and
(b)
had not been designated under the arrangement as available for the
payment of unsecured pension.
40
      (3)
But if an amount falling within sub-paragraph (1) exceeds the permitted
maximum, the excess is not an uncrystallised funds 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,
45

Finance Bill
Schedule 29 — Registered pension schemes: authorised lump sums—supplementary
Part 2 — Lump sum death benefit rule
437


which constitute the relevant uncrystallised funds immediately before the
payment is made.
Annuity protection lump sum death benefit
16    (1)
For the purposes of this Part a lump sum death benefit is an annuity
protection lump sum death benefit if—
5
(a)
the member had not reached the age of 75 at the date of the member’s
death,
(b)
it is paid in respect of a money purchase arrangement, and
(c)
it is paid in respect of a scheme pension or lifetime annuity to which
the member was entitled at the date of the member’s death.
10
      (2)
But if the amount of a lump sum falling within sub-paragraph (1) exceeds
the annuity protection limit, the excess is not an annuity protection lump
sum death benefit.
      (3)
The annuity protection limit is—

where—
15
AC is the amount crystallised by reason of the member becoming
entitled to the pension or annuity (see section 205),
AP is the amount of the pension paid in respect of the period between
the member becoming entitled to the pension or annuity and the
member’s death, and
20
TPLS is the total amount of annuity protection lump sum death
benefit previously paid under this paragraph.
Unsecured pension fund lump sum death benefit
17    (1)
For the purposes of this Part a lump sum death benefit is an unsecured
pension fund lump sum death benefit if—
25
(a)
the member had not reached the age of 75 at the date of the member’s
death, and
(b)
it is paid in respect of income withdrawal to which the member was
entitled under an arrangement at the date of the member’s death.
      (2)
A lump sum death benefit is also an unsecured pension fund lump sum
30
death benefit if—
(a)
it is paid on the death of a dependant of the member,
(b)
the dependant had not reached the age of 75 at the date of the
dependant’s death, and
(c)
it is paid in respect of dependants’ income withdrawal to which the
35
dependant was entitled at the date of the dependant’s death in
respect of an arrangement relating to the member.
      (3)
But if the amount of a lump sum falling within sub-paragraph (1) or (2)
exceeds the permitted maximum, the excess is not an unsecured pension
fund lump sum death benefit.
40
      (4)
The permitted maximum is the aggregate of—
(a)
the amount of the sums, and
(b)
the market value of the assets,

representing the member’s or dependant’s unsecured pension fund in
respect of the arrangement immediately before the payment is made.
45

Finance Bill
Schedule 29 — Registered pension schemes: authorised lump sums—supplementary
Part 2 — Lump sum death benefit rule
438

Charity lump sum death benefit
18    (1)
A lump sum death benefit is a charity lump sum death benefit if—
(a)
the member had reached the age of 75 at the date of the member’s
death,
(b)
there are no dependants of the member,
5
(c)
it is paid in respect of income withdrawal to which the member was
entitled in respect of an arrangement at the date of the member’s
death, and
(d)
it is paid to a charity nominated by the member.
      (2)
A lump sum death benefit is also a charity lump sum death benefit if—
10
(a)
it is paid on the death of a dependant of the member,
(b)
the dependant had reached the age of 75 at the date of the
dependant’s death,
(c)
there are no other dependants of the member,
(d)
it is paid in respect of dependants’ income withdrawal to which the
15
dependant was entitled at the date of the dependant’s death in
respect of an arrangement relating to the member, and
(e)
it is paid to a charity nominated by the member (or, if the member
made no nomination, by the dependant).
      (3)
But if the amount of a lump sum falling within sub-paragraph (1) or (2)
20
exceeds the permitted maximum, the amount of the excess is not a charity
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,
25

representing the member’s or dependant’s alternatively secured pension
fund in respect of the arrangement immediately before the payment is made.
Transfer lump sum death benefit
19    (1)
For the purposes of this Part a lump sum death benefit is a transfer lump
sum death benefit if—
30
(a)
the member had reached the age of 75 at the date of the member’s
death,
(b)
there are no dependants of the member,
(c)
it is paid in respect of income withdrawal to which the member was
entitled in respect of an arrangement at the date of the member’s
35
death, and
(d)
it is paid so as to become held for the purposes of, or to represent
accrued rights under, arrangements under the pension scheme
relating to one or more members of the pension scheme nominated
by the deceased member (or if the member made no nomination,
40
selected by the scheme administrator).
      (2)
A lump sum death benefit is also a transfer lump sum death benefit if—
(a)
it is paid on the death of a dependant of the member,
(b)
the dependant had reached the age of 75 at the date of the
dependant’s death,
45
(c)
there are no other dependants of the member,

Finance Bill
Schedule 29 — Registered pension schemes: authorised lump sums—supplementary
Part 2 — Lump sum death benefit rule
439

(d)
it is paid in respect of dependants’ income withdrawal to which at
the date of the dependant’s death the dependant was entitled in
respect of an arrangement relating to the member under the pension
scheme, and
(e)
it is paid so as to become held for the purposes of, or to represent
5
accrued rights under, arrangements under the pension scheme
relating to one or more members of the pension scheme nominated
by the relevant person (or if the relevant person made no
nomination, selected by the scheme administrator).
      (3)
The relevant person is the member or, if no nomination is made by the
10
member, the dependant.
      (4)
But if the amount of a lump sum falling within sub-paragraph (1) or (2)
exceeds the permitted maximum, the amount of the excess is not a transfer
lump sum death benefit.
      (5)
The permitted maximum is the aggregate of—
15
(a)
the amount of the sums, and
(b)
the market value of the assets,

representing the member’s or dependant’s alternatively secured pension
fund in respect of the arrangement immediately before the payment is made.
Defined benefits and money purchase arrangements
20
Trivial commutation lump sum death benefit
20    (1)
A lump sum death benefit is a trivial commutation lump sum death benefit
if—
(a)
the member had not reached the age of 75 at the date of the member’s
death,
25
(b)
it is paid to a dependant entitled under the pension scheme to
pension death benefit in respect of the member,
(c)
it is paid before the day on which the member would have reached
the age of 75, and
(d)
it extinguishes the dependant’s entitlement under the pension
30
scheme to pension death benefit and lump sum death benefit in
respect of the member.
      (2)
But if the amount of a lump sum falling within sub-paragraph (1) exceeds
1% of the standard lifetime allowance on the date the lump sum is paid, the
excess is not a trivial commutation lump sum death benefit.
35
Winding-up lump sum death benefit
21    (1)
A lump sum death benefit is a winding-up lump sum death benefit if—
(a)
the pension scheme is being wound-up,
(b)
it is paid to a dependant entitled under the pension scheme to
pension death benefit in respect of the member, and
40
(c)
it extinguishes the dependant’s entitlement under the pension
scheme to pension death benefit and lump sum death benefit in
respect of the member.
      (2)
But if the amount of a lump sum falling within sub-paragraph (1) exceeds
1% of the standard lifetime allowance on the date the lump sum is paid, the
45
excess is not a winding-up lump sum death benefit.

Finance Bill
Schedule 30 — Registered pension schemes: employer loans
440

Interpretation
Interpretation of Part 2
22    (1)
Expressions used in this Part of this Schedule and in Schedule 28 have the
same meaning in this Part of this Schedule as in Schedule 28.
      (2)
Where by virtue of paragraph 14(2), 20(2) or 21(2) an excess is not an
5
authorised lump sum death benefit of one description, that does not prevent
the excess being an authorised lump sum death benefit of another
description.
      (3)
“Authorised lump sum death benefit” means a lump sum death benefit
authorised to be paid by the lump sum death benefit rule.
10
Schedule 30
Section 168

Registered pension schemes: employer loans
Definitions
Charge of adequate value
1     (1)
A charge is of adequate value if it meets conditions A, B and C.
15
      (2)
Condition A is that, at the time the charge is given, the market value of the
assets subject to the charge—
(a)
in the case of the first charge to secure the loan, is at least equal to the
amount owing (including interest), and
(b)
in any other case, is at least equal to the lower of that amount and the
20
market value of the assets subject to the previous charge.
      (3)
Condition B is that if, at any time after the charge is given, the market value
of the assets charged is less than would be required under condition A if the
charge were given at that time, the reduction in value is not attributable to
any step taken by the pension scheme, the sponsoring employer or a person
25
connected with the sponsoring employer.
      (4)
Condition C is that the charge takes priority over any other charge over the
assets.
Loan repayment date
2     (1)
“Loan repayment date” means the date by which the total amount owing
30
(including interest) must be paid.
      (2)
A standard loan repayment date is a loan repayment date before the end of
the period of five years beginning with the date on which the loan is made.
Loan year
3     (1)
“Loan year” means—
35
(a)
the period of 12 months beginning with the date on which the loan is
made, and
(b)
each succeeding period of 12 months.