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Finance Bill
Schedule 34 — Pension schemes etc: transitional provisions and savings
Part 3 — Pre-commencement benefit rights

476

 

(b)   

that the individual’s right to receive a lump sum had not been

occasioned by physical or mental impairment.

25    (1)  

If (and for so long as) paragraph 12 (enhanced protection: no relevant benefit

accrual post-commencement) applies in relation to the individual,

paragraph 2 of Schedule 29 applies in relation to the individual with the

5

following modifications.

      (2)  

If the value of the individual’s relevant uncrystallised lump sum rights on

5th April 2006 (calculated in accordance with paragraph 24) was nil, the

permitted maximum under paragraph 2 is nil.

      (3)  

Otherwise, paragraph 2 applies as if for sub-paragraphs (5) to (8) there were

10

substituted—

     “(5)  

If sub-paragraph (2) does not apply, the permitted maximum is

the applicable amount, calculated in accordance with paragraph

3”

26    (1)  

If paragraph 12 (enhanced protection: no relevant benefit accrual post-

15

commencement) does not apply in relation to the individual, paragraph 2 of

Schedule 29 applies in relation to the individual with the following

modifications.

      (2)  

If the value of the individual’s relevant uncrystallised lump sum rights on

5th April 2006 (calculated in accordance with paragraph 24) was nil, the

20

permitted maximum under paragraph 2 is nil.

      (3)  

Otherwise, paragraph 2 applies as if for sub-paragraphs (6) and (7) there

were substituted—

     “(6)  

The available portion of the member’s lump sum allowance is—equation: plus[times[char[V],char[U],char[L],char[S],char[R]],minus[times[char[A],char[P],

char[C],char[L],char[S]]]]

           

where—

25

VULSR is the value of the individual’s relevant

uncrystallised lump sum rights on 5th April 2006

(calculated in accordance with paragraph 24 of Schedule

34), as adjusted under sub-paragraph (6A), and

APCLS is the aggregate of the amounts of each pension

30

commencement lump sum to which the individual has

previously become entitled, as adjusted under sub-

paragraph (7) (or, if the individual has not previously

become entitled to a pension commencement lump sum,

is nil).

35

     (6A)  

The adjustment referred to in the definition of VULSR is the

multiplication of the value of the individual’s relevant

uncrystallised lump sum rights on 5th April 2006 by—equation: over[times[char[C],char[S],char[L],char[A]],times[char[F],char[S],char[L],char[A]]]

           

where—

CSLA is the current standard lifetime allowance, and

40

FSLA is £1,500,000 (the standard lifetime allowance in the

tax year 2006-07).

      (7)  

The adjustment of the amount of a pension commencement lump

sum to which the individual has previously become entitled

 

 

Finance Bill
Schedule 34 — Pension schemes etc: transitional provisions and savings
Part 3 — Pre-commencement benefit rights

477

 

referred to in the definition of APCLS is the multiplication of the

amount by—equation: over[times[char[C],char[S],char[L],char[A]],times[char[P],char[S],char[L],char[A]]]

           

where—

CSLA is the current standard lifetime allowance, and

PSLA is the standard lifetime allowance at the time the

5

individual became entitled to the lump sum.”

27    (1)  

Whether or not paragraph 12 (enhanced protection: no relevant benefit

accrual post-commencement) applies in relation to the individual,

paragraph 3 of Schedule 29 (applicable amount) applies with the following

modifications.

10

      (2)  

Paragraph 3 applies as if for sub-paragraph (1) there were substituted—

     “(1)  

Where the member becomes entitled to income withdrawal, the

applicable amount is—equation: cross[over[times[char[V],char[U],char[L],char[S],char[R]],times[char[V],char[U],

char[R]]],id[plus[times[char[L],char[S]],times[char[A],char[D]]]]]

           

where—

VULSR is the value of the individual’s relevant

15

uncrystallised lump sum rights on 5th April 2006,

calculated in accordance with paragraph 24 of Schedule

34,

VUR is the value of the individual’s uncrystallised rights on

5th April 2006,

20

LS is the lump sum paid, and

AD is the aggregate of the amount of the sums, and the

market value of the assets, designated as available for the

payment of unsecured pension on that occasion.

     (1A)  

For the purposes of this paragraph the individual’s rights are

25

“uncrystallised” if the individual has not, on 5th April 2006,

become entitled to the present payment of benefits in respect of the

rights (the individual being treated as entitled to the present

payment of benefits in respect of any accrued rights in relation to

which the individual has, under section 634A(1) of ICTA, made an

30

election to defer the purchase of an annuity).

     (1B)  

The value of the individual’s uncrystallised rights on 5th April

2006 is the aggregate of the value on that date of the individual’s

uncrystallised rights under each relevant pension arrangement,

calculated in accordance with section 201 (valuation of

35

uncrystallised rights for purposes of section 199).

     (1C)  

An arrangement is a “relevant pension arrangement” if it is an

arrangement under a pension scheme within paragraph 1(1).”

      (3)  

Paragraph 3 applies as if for sub-paragraph (3) there were substituted—

     “(3)  

Where the member becomes entitled to a lifetime annuity, the

40

applicable amount is—equation: cross[over[times[char[V],char[U],char[L],char[S],char[R]],times[char[V],char[U],

char[R]]],id[plus[times[char[L],char[S]],times[char[A],char[P],char[P]]]]]

           

where—

 

 

Finance Bill
Schedule 34 — Pension schemes etc: transitional provisions and savings
Part 3 — Pre-commencement benefit rights

478

 

VULSR, VUR and LS have the same meaning as in sub-

paragraph (1), and

APP is the annuity purchase price.”

      (4)  

Paragraph 3 applies as if for sub-paragraphs (6) and (7) there were

substituted—

5

     “(6)  

Where the member becomes entitled to a scheme pension, the

applicable amount is—equation: cross[over[times[char[V],char[U],char[L],char[S],char[R]],times[char[V],char[U],

char[R]]],id[plus[times[char[L],char[S]],times[char[A],char[C]]]]]

           

but subject to sub-paragraph (8).

      (7)  

In sub-paragraph (6)—

VULSR, VUR and LS have the same meaning as in sub-

10

paragraph (1), and

AC is the amount crystallised by reason of the member

becoming entitled to the pension (see section 205).”

28    (1)  

Any part of a lump sum falling within paragraph 1(1) of Schedule 29

which—

15

(a)   

under paragraph 1(2) of that Schedule is not a pension

commencement lump sum (because the lump sum exceeds the

permitted maximum), and

(b)   

is an unauthorised payment,

           

is to be treated as exempt from being scheme chargeable (under section

20

230(2)) if the condition in sub-paragraph (2) is met.

      (2)  

The condition is that it would not have been an unauthorised payment if

paragraphs 26 and 27 had not applied.

Entitlement to lump sums exceeding 25% of uncrystallised rights

29    (1)  

Paragraph 30 applies if on 5th April 2006 the lump sum percentage of an

25

individual’s uncrystallised rights under a relevant pension scheme exceeds

25% (but subject to sub-paragraph (2)).

      (2)  

Paragraph 30 does not apply if the lump sum condition and registration

condition in paragraph 23 are met.

      (3)  

A pension scheme is a relevant pension scheme if it is within paragraph

30

1(1)(a) to (e).

      (4)  

The lump sum percentage of an individual’s uncrystallised pension rights

under a relevant pension scheme is—equation: cross[over[times[char[V],char[U],char[L],char[S],char[R]],times[char[V],char[U],

char[R]]],num[100.00000000,"100"]]

           

where—

VULSR is the value of the individual’s uncrystallised lump sum rights

35

under the pension scheme on 5th April 2006, and

VUR is the value of the individual’s uncrystallised rights under the

pension scheme on 5th April 2006.

      (5)  

The value of the individual’s uncrystallised lump sum rights under the

pension scheme on 5th April 2006 is the aggregate of the value of the

40

individual’s uncrystallised lump sum rights under each arrangement in

respect of the individual under the pension scheme, calculated in

accordance with paragraph 24(5), on that date.

 

 

Finance Bill
Schedule 34 — Pension schemes etc: transitional provisions and savings
Part 3 — Pre-commencement benefit rights

479

 

      (6)  

For the purposes of this paragraph the individual’s rights are

“uncrystallised” if the individual has not, on 5th April 2006, become entitled

to the present payment of benefits in respect of the rights (the individual

being treated as entitled to the present payment of benefits in respect of any

accrued rights in relation to which the individual has, under section 634A(1)

5

of ICTA, made an election to defer the purchase of an annuity).

      (7)  

The value of the individual’s uncrystallised rights under the pension scheme

on 5th April 2006 is the aggregate of the value of the individual’s

uncrystallised rights under each arrangement in respect of the individual

under the pension scheme, calculated in accordance with section 201

10

(valuation of uncrystallised rights for purposes of section 199).

30    (1)  

If the pension condition is met on the first occasion after 5th April 2006 on

which the individual becomes entitled under the pension scheme to a lump

sum falling within paragraph 1(1) of Schedule 29 (pension commencement

lump sums), paragraph 31 (which modifies that Schedule in relation to

15

pension commencement lump sums) applies in relation to that occasion.

      (2)  

The pension condition is that—

(a)   

the pension in connection with which the individual becomes

entitled to the lump sum is the first pension to which the individual

becomes entitled under the pension scheme on or after 6th April

20

2006, and

(b)   

after the individual becomes entitled to the pension, the individual

has no prospective (rather than actual) right to a pension under the

pension scheme.

31    (1)  

Schedule 29 applies with the following modifications.

25

      (2)  

Paragraph 2 applies as if for sub-paragraphs (5) to (7) there were

substituted—

     “(5)  

If paragraph 2(2) does not apply and relevant benefit accrual has

occurred under the pension scheme in relation to the individual

after 5th April 2006, the permitted maximum is—equation: times[(*n*)char[(*n*)V],char[(*n*)U],char[(*n*)L],char[(*n*)S],cross[char[(*n*)R],

over[times[char[C],char[S],char[L],char[A]],times[char[F],char[S],char[L],char[A]]]]]

30

      (6)  

If paragraph 2(2) does not apply and relevant benefit accrual has

not occurred under the pension scheme in relation to the

individual after 5th April 2006, the permitted maximum is—equation: plus[id[times[char[V],char[U],cross[times[char[L],char[S],char[R]],over[times[char[

C],char[S],char[L],char[A]],times[char[F],char[S],char[L],char[A]]]]]],times[char[

A],char[L],char[S],char[A]]]

      (7)  

In this paragraph—

VULSR is the value of the individual’s uncrystallised lump

35

sum rights under the pension scheme on 5th April 2006,

calculated in accordance with paragraph 29 of Schedule

34,

CSLA is the current standard lifetime allowance,

FSLA is £1,500,000 (the standard lifetime allowance for the

40

tax year 2006-07), and

ALSA is the additional lump sum amount.

 

 

Finance Bill
Schedule 34 — Pension schemes etc: transitional provisions and savings
Part 3 — Pre-commencement benefit rights

480

 

     (7A)  

The additional lump sum amount is—equation: over[(*n*)plus[(*n*)times[(*n*)char[(*n*)L],char[(*n*)S]],times[(*n*)char[(*n*)A],

char[(*n*)C]],minus[(*n*)id[cross[(*n*)times[(*n*)char[(*n*)V],char[(*n*)U],char[

(*n*)R]],over[(*n*)times[(*n*)char[(*n*)C],char[(*n*)S],char[(*n*)L],char[(*n*)A]],

times[(*n*)char[(*n*)F],char[(*n*)S],char[(*n*)L],char[(*n*)A]]]]]]],num[(*n*)4.00000000,

"4"]]

           

where—

LS is the lump sum paid (but this is subject to sub-

paragraph (7B)),

AC is the amount crystallised on the individual becoming

5

entitled to the pension in connection with which the lump

sum is paid (see section 205) (but this is subject to sub-

paragraph (7B)), and

VUR is the value of the individual’s uncrystallised rights

under the pension scheme on 5th April 2006, calculated in

10

accordance with paragraph 29 of Schedule 34.

     (7B)  

Any part of the lump sum and the amount crystallised which

represents rights attributable to a disqualifying pension credit is to

be disregarded.

     (7C)  

Paragraph 13 of Schedule 34 specifies when relevant benefit

15

accrual occurs in relation to an individual.”

      (3)  

Omit paragraph 3 (applicable amount for pension commencement lump

sums).

32    (1)  

In paragraphs 30 and 31 references to the pension scheme include a

registered pension scheme to which there has been a block transfer from the

20

pension scheme on or after 6th April 2006.

      (2)  

A block transfer is a recognised transfer, in a single transaction, of sums or

assets representing all the accrued rights under the pension scheme of the

individual and at least one other member of the pension scheme.

Winding-up lump sums paid by former approved superannuation funds

25

33    (1)  

For the tax year 2006-07, Schedule 29 (authorised lump sums) applies in

relation to former approved superannuation funds with the modifications

specified in sub-paragraphs (2) and (3).

      (2)  

Paragraph 10 (winding-up lump sums) applies as if the following were

omitted—

30

(a)   

sub-paragraph (1)(c) and (d),

(b)   

sub-paragraph (2), and

(c)   

sub-paragraph (3).

      (3)  

Paragraph 11 (lifetime allowance excess lump sums) applies as if at the end

of paragraph (b) there were inserted “or a winding-up lump sum”.

35

      (4)  

Section 636B of ITEPA 2003 (taxation of trivial commutation and winding-

up lump sums) applies in relation to a winding-up lump sum paid by a

former approved superannuation fund in the tax year 2006-07 as if—

(a)   

in subsection (2), after “equal to” there were inserted “75% of”, and

(b)   

subsection (3) were omitted.

40

      (5)  

“Former approved superannuation fund” has the meaning given by

paragraph 1(3).

 

 

Finance Bill
Schedule 34 — Pension schemes etc: transitional provisions and savings
Part 4 — Other provisions

481

 

Right to payment of lump sum death benefit after age 75

34    (1)  

This paragraph applies to a member of a registered pension scheme if on 5th

April 2006—

(a)   

the pension scheme was a relevant pension scheme,

(b)   

the member had an actual (rather than prospective) right to a

5

pension under the pension scheme, and

(c)   

under the pension scheme a lump sum death benefit not exceeding

the pension protection amount was payable on the death of the

member within the guarantee period.

      (2)  

A pension scheme is a “relevant pension scheme” if—

10

(a)   

the pension scheme is within paragraphs (a) to (e) of paragraph 1(1),

and

(b)   

none of the benefits payable by the pension scheme are money

purchase benefits.

      (3)  

Paragraph 13 of Schedule 29 (defined benefits lump sum death benefit)

15

applies as if paragraph (a) were omitted.

      (4)  

But if the member had reached the age of 75 at the date of the member’s

death, so much of a lump sum falling within paragraph 13 of that Schedule

(as modified by sub-paragraph (3)) as exceeds the pension protection

amount is not a defined benefits lump sum death benefit.

20

      (5)  

The pension protection amount is the total pension to which the member

would have been entitled in the period—

(a)   

beginning with the member’s death, and

(b)   

ending on the last day of the guarantee period,

           

had the member lived until the end of the guarantee period.

25

      (6)  

The guarantee period is the period of five years beginning with the day on

which the member became entitled to the pension.

Part 4

Other provisions

Pre-commencement ill-health insurance contracts

30

35    (1)  

Payments under protected ill-health insurance contracts are not

unauthorised member payments.

      (2)  

Ill-health insurance contracts are contracts providing insurance against a

risk relating to non-payment by a member of a pension scheme of

contributions under the pension scheme.

35

      (3)  

An ill-health insurance contract is protected if it was made before 6th April

2006 under—

(a)   

a personal pension scheme approved under Chapter 4 of Part 14 of

ICTA before 6th April 2001, or

(b)   

an annuity contract or trust scheme approved under section 620 or

40

621 of ICTA or a substituted contract within the meaning of section

622(3) of ICTA.

 

 

Finance Bill
Schedule 34 — Pension schemes etc: transitional provisions and savings
Part 4 — Other provisions

482

 

Pre-commencement loans to sponsoring employers

36    (1)  

This paragraph applies to a loan if—

(a)   

the loan was made before 6th April 2006 by an occupational pension

scheme which becomes a registered pension scheme on that date,

(b)   

had this Part had been in force and had the pension scheme been a

5

registered pension scheme at the time when the loan was made, it

would have been a loan to a sponsoring employer, and

(c)   

the date by which the total amount owing (including interest) must

be paid is on or after 6th April 2006.

      (2)  

If on or after 6th April 2006 there is no alteration in the repayment terms,

10

section 168 (authorised employer loan) does not apply in relation to the loan.

      (3)  

If on or after 6th April 2006 there is an alteration in the repayment terms,

section 168 applies as if, on the date of the alteration, the pension scheme

made a loan to the sponsoring employer of an amount equal to the amount

owing (including interest) on that date.

15

      (4)  

The postponement of the date by which the total amount owing (including

interest) must be paid is not an alteration in the repayment terms if—

(a)   

an amount is outstanding on the date by which the total amount

owing should have been paid,

(b)   

the postponement is for a period not exceeding five years, and

20

(c)   

there has been no previous postponement on or after 6th April 2006.

Retirement annuity contracts: carry-back of pre-commencement contributions

37         

The repeal by this Act of section 619(4) of ICTA (election before 31st January

following tax year in which retirement annuity contract premium is paid to

treat premium as paid in earlier tax year) does not prevent the making of an

25

election under that provision (in relation to a premium paid in the tax year

2005-06) at any time before 6th January 2007.

Members’ contributions to pre-commencement retirement annuity contracts

38    (1)  

Relief in respect of contributions made by a member under pre-

commencement retirement annuity arrangements is not required to be given

30

in accordance with section 181 (relief at source).

      (2)  

If relief in respect of contributions made by a member under pre-

commencement retirement annuity arrangements is not given in accordance

with section 181, relief in respect of the contributions is to be given in

accordance with section 183 (relief on making of claim).

35

      (3)  

“Pre-commencement retirement annuity arrangements” means—

(a)   

an annuity contract or trust scheme approved under section 620 or

621 of ICTA, or

(b)   

a substituted contract within the meaning of section 622(3) of ICTA.

Employers’ contributions relieved before 6th April 2006

40

39         

To the extent that any contribution paid by an employer under a registered

pension scheme was—

(a)   

allowed to be deducted for the purposes of Case I or II of Schedule D,

 

 

 
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