House of Commons portcullis
House of Commons
Session 2003 - 04
Internet Publications
Other Bills before Parliament

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—equation: over[times[char[S],char[L],char[A],char[N]],times[char[F],char[S],char[L],char[A]]]

           

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—equation: over[times[char[S],char[L],char[A],char[N]],times[char[P],char[S],char[L],char[A]]]

           

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—equation: plus[times[char[A],char[C]],minus[times[char[A],char[P]]],minus[times[char[T],char[

P],char[L],char[S]]]]

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—equation: plus[times[char[A],char[C]],minus[times[char[A],char[P]]],minus[times[char[T],char[

P],char[L],char[S]]]]

           

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.

 

 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2004
Revised 6 April 2004