Finance Bill

House of Commons

Session 2002 - 03
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Finance Bill

Finance Bill
Schedule 28 — Registered pension schemes: authorised pensions—supplementary
Part 1 — Pension rules
444

member’s unsecured pension fund on the nominated date (but subject to
sub-paragraph (5)).
      (3)
“The nominated date”—
(a)
in relation to the first reference period, is the reference date, and
(b)
in relation to any subsequent reference period, is such day, within
5
the period of 60 days ending with the reference date, as is nominated
by the scheme administrator (or, if no day is nominated by the
scheme administrator, is the reference date).
      (4)
For each other unsecured pension year falling within a reference period, the
basis amount is the annual amount of the relevant annuity which could have
10
been purchased by the application of the sums and assets representing the
member’s unsecured pension fund—
(a)
if there has been no recent annuity purchase or recent additional
fund designation, on the nominated date, and
(b)
otherwise, immediately after the last annuity purchase or additional
15
fund designation,

(but subject to sub-paragraph (5)).
      (5)
On the occasion of each additional fund designation during an unsecured
pension year, the basis amount for that unsecured pension year is to be
recalculated in accordance with sub-paragraph (6).
20
      (6)
The basis amount for the unsecured pension year is the annual amount of
the relevant annuity which could have been purchased by the application of
the sums and assets representing the member’s unsecured pension fund
immediately after the additional fund designation.
      (7)
“Annuity purchase” means the purchase of a scheme pension or a lifetime
25
annuity by the application of sums or assets representing the whole or part
of the member’s unsecured pension fund.
      (8)
“Additional fund designation” means the designation under the
arrangement of further sums or assets held for the purposes of the
arrangement as available for the payment of unsecured pension.
30
      (9)
An annuity purchase or additional fund designation is “recent” if it took
place during the period—
(a)
beginning with the reference date, and
(b)
ending with the last day of the immediately preceding unsecured
pension year.
35
     (10)
Paragraph 14 defines “relevant annuity”.
Member’s alternatively secured pension fund
11    (1)
For the purposes of this Part the member’s alternatively secured pension
fund in respect of an arrangement consists of such of the sums and assets
held for the purposes of the arrangement as—
40
(a)
meet condition A or condition B, and
(b)
have not been subsequently applied for purchasing a scheme
pension or a lifetime annuity or paid as income withdrawal.
      (2)
Condition A is that the sums and assets were part of the member’s
unsecured pension fund in respect of the arrangement when the member
45
reached the age of 75.
      (3)
Condition B is that the sums and assets—

Finance Bill
Schedule 28 — Registered pension schemes: authorised pensions—supplementary
Part 1 — Pension rules
445

(a)
became held for the purposes of the arrangement after the member
reached the age of 75, or
(b)
if the arrangement is a relevant arrangement, have at any time since
the member reached that age been designated as available for the
payment of alternatively secured pension to the member.
5
      (4)
A relevant arrangement is an arrangement which became a money purchase
arrangement after the member reached the age of 75 (having previously
been a hybrid arrangement under which, in certain circumstances, defined
benefits were payable).
Alternatively secured pension year and basis amount for alternatively secured pension year
10
12    (1)
“Alternatively secured pension year” means—
(a)
the period of 12 months beginning with the day on which the
member first becomes entitled to alternatively secured pension in
respect of the arrangement, and
(b)
each succeeding period of 12 months.
15
      (2)
When the member dies, the current alternatively secured pension year is the
last alternatively secured pension year and ends immediately before the
member’s death.
      (3)
But if by virtue of pension rule 2 alternatively secured income is to be paid
to a person after the member’s death, sub-paragraph (4) applies instead of
20
sub-paragraph (2).
      (4)
The last alternatively secured pension year is the earlier of—
(a)
the tenth alternatively secured pension year, and
(b)
the last alternatively secured pension year in which, under the
arrangement, alternatively secured pension is to be paid.
25
13    (1)
For the first alternatively secured pension year, the basis amount is the
annual amount of the relevant annuity which could have been purchased by
the application of the sums and assets representing the member’s
alternatively secured pension fund on the date on which the member first
became entitled to alternatively secured pension in respect of the
30
arrangement.
      (2)
For each other alternatively secured pension year, the basis amount is the
annual amount of the relevant annuity which could have been purchased by
the application of the sums and assets representing the member’s
alternatively secured pension fund on the nominated date.
35
      (3)
“The nominated date” is such day within the period of 60 days ending with
the first day of the alternatively secured pension year as is nominated by the
scheme administrator (or, if no day is nominated by the scheme
administrator, is the first day of the alternatively secured pension year).
      (4)
Paragraph 14 defines “relevant annuity”.
40
Relevant annuity
14    (1)
A “relevant annuity” is an annuity of a description prescribed by regulations
made by the Board of Inland Revenue.
      (2)
The annual amount of a relevant annuity is to be ascertained in accordance
with regulations made by the Board of Inland Revenue.
45

Finance Bill
Schedule 28 — Registered pension schemes: authorised pensions—supplementary
Part 2 — Pension death benefit rules
446

      (3)
The regulations may in particular provide for the annual amount to be
ascertained by reference to—
(a)
comparative annuity tables published by the Financial Services
Authority, or
(b)
material published by any other person.
5
Part 2
Pension death benefit rules
Defined benefits and money purchase arrangements
Meaning of “dependant”
15    (1)
A person who was married to the member at the date of the member’s death
10
is a dependant of the member.
      (2)
A child of the member is a dependant of the member if the child—
(a)
has not reached the age of 23, or
(b)
has reached that age and, in the opinion of the scheme administrator,
was at the date of the member’s death dependant on the member
15
because of physical or mental impairment.
      (3)
A person who was not married to the member at the date of the member’s
death and is not a child of the member is a dependant of the member if, in
the opinion of the scheme administrator, at the date of the member’s death—
(a)
the person was financially dependant on the member,
20
(b)
the person’s financial relationship with the member was one of
mutual dependence, or
(c)
the person was dependant on the member because of physical or
mental impairment.
Dependants’ scheme pension
25
16    (1)
In the case of a pension scheme with fewer than 50 members, a pension
payable to a dependant is a dependants’ scheme pension for the purposes of
this Part if—
(a)
it is payable by an insurance company selected by the scheme
administrator or, where the scheme administrator is an insurance
30
company, by the scheme administrator, and
(b)
it satisfies the condition in sub-paragraph (3).
      (2)
In the case of a pension scheme with 50 or more members, a pension payable
to a dependant is a dependants’ scheme pension if—
(a)
it is payable by the scheme administrator or by an insurance
35
company selected by the scheme administrator, and
(b)
it satisfies the condition in sub-paragraph (3).
      (3)
The condition is that (subject to sub-paragraph (4))—
(a)
if the dependant is not the member’s child, the pension is payable
until the dependant’s death or until the earlier of the dependant’s
40
marrying or dying,
(b)
if the dependant is the member’s child, the pension is payable until
the earlier of the dependant’s ceasing to be a dependant or dying, or

Finance Bill
Schedule 28 — Registered pension schemes: authorised pensions—supplementary
Part 2 — Pension death benefit rules
447

until the earliest of the dependant’s marrying, ceasing to be a
dependant or dying, and
(c)
the rate of pension payable in respect of any relevant 12 month
period is not less than the rate payable in respect of the previous 12
month period.
5
      (4)
Neither of the following prevents the pension satisfying the condition in
sub-paragraph (3)—
(a)
a reduction in the rate of the pension which applies to all the
dependants’ scheme pensions being paid in respect of members of
the pension scheme, or
10
(b)
if the dependant becomes entitled to state retirement pension, a
reduction in the rate of the pension which does not exceed the rate at
which state retirement pension is payable (or, if the rate at which
state retirement pension is payable is greater than the rate of the
pension, the pension ceasing to be payable).
15
      (5)
For the purposes of sub-paragraph (4)(b) the following constitute “state
retirement pension”—
(a)
retirement pension under SSCBA 1992 or SSCB(NI)A 1992, and
(b)
graduated retirement benefit under NIA 1965 or NIA(NI) 1966.
      (6)
A relevant 12 month period is any 12 month period which—
20
(a)
begins on or after the first anniversary of the member’s death, and
(b)
ends before the day on which the pension ceases to be payable.
Money purchase arrangements
Dependants’ annuity
17    (1)
An annuity payable to a dependant is a dependants’ annuity if—
25
(a)
it is payable by an insurance company,
(b)
the member or dependant had an opportunity to select the insurance
company,
(c)
it is a level annuity, an increasing annuity or a relevant linked
annuity,
30
(d)
where the dependant is not the member’s child, it is payable until the
dependant’s death or until the earlier of the dependant’s marrying
or dying, and
(e)
where the dependant is the member’s child, it is payable until the
earlier of the dependant’s ceasing to be a dependant or dying, or
35
until the earliest of the dependant’s marrying, ceasing to be a
dependant or dying.
      (2)
“Level annuity” and “increasing annuity” have the same meaning as in
paragraph 3 and “relevant linked annuity” has the meaning that it would
have in that paragraph if the reference to the member in sub-paragraph (6)
40
were to the dependant.
Dependants’ unsecured pension and dependants’ alternatively secured pension
18
“Dependants’ unsecured pension” means—
(a)
a dependants’ short-term annuity, or
(b)
dependants’ income withdrawal.
45

Finance Bill
Schedule 28 — Registered pension schemes: authorised pensions—supplementary
Part 2 — Pension death benefit rules
448

19
“Dependants’ alternatively secured pension” means dependants’ income
withdrawal.
Dependants’ short-term annuity
20    (1)
An annuity payable to a dependant is a dependants’ short-term annuity if—
(a)
it is purchased by the application of sums or assets representing the
5
whole or any part of the dependant’s unsecured pension fund in
respect of an arrangement,
(b)
it is payable by an insurance company,
(c)
the dependant had an opportunity to select the insurance company,
(d)
it is payable for a term which does not exceed five years and ends
10
before the dependant reaches the age of 75 or dies, and
(e)
it is either a level annuity, an increasing annuity or a relevant linked
annuity.
      (2)
“Level annuity”, “increasing annuity” and “relevant linked annuity” have
the same meaning as in paragraph 17.
15
Dependants’ income withdrawal
21
Dependants’ income withdrawal means—
(a)
if the dependant has not reached the age of 75, an amount (other than
an annuity) which the dependant is entitled to be paid from the
dependant’s unsecured pension fund in respect of an arrangement,
20
and
(b)
if the dependant has reached the age of 75, an amount which the
dependant is entitled to be paid from the dependant’s alternatively
secured pension fund in respect of an arrangement.
Dependant’s unsecured pension fund
25
22    (1)
For the purposes of this Part a dependant’s unsecured pension fund in
respect of an arrangement consists of such of the sums and assets held for
the purposes of the arrangement—
(a)
as have at any time been designated under the arrangement as
available for the payment of dependants’ unsecured pension to the
30
dependant, and
(b)
have not been applied for purchasing a dependants’ scheme
pension, a dependants’ annuity or a dependants’ short-term annuity
or paid as dependants’ income withdrawal.
Unsecured pension year and basis amount for unsecured pension year
35
23    (1)
“Unsecured pension year” means—
(a)
the period of 12 months beginning with the day on which the
dependant first becomes entitled to dependants’ unsecured pension
in respect of the arrangement, and
(b)
each succeeding period of 12 months.
40
      (2)
But when the dependant reaches the age of 75 or dies before reaching that
age, the current unsecured pension year is the last unsecured pension year
and ends immediately before the dependant’s death or 75th birthday.

Finance Bill
Schedule 28 — Registered pension schemes: authorised pensions—supplementary
Part 2 — Pension death benefit rules
449

24    (1)
The period of five unsecured pension years beginning with the first
unsecured pension year, and each succeeding period of five unsecured
pension years, is a “reference period”; and the first day of each reference
period is, in relation to that period, “the reference date”.
      (2)
For the first unsecured pension year falling within a reference period, the
5
basis amount is the annual amount of the relevant annuity which could have
been purchased by the application of the sums and assets representing the
dependant’s unsecured pension fund on the nominated date (but subject to
sub-paragraph (5)).
      (3)
“The nominated date”—
10
(a)
in relation to the first reference period, is the reference date, and
(b)
in relation to any subsequent reference period, is such day, within
the period of 60 days ending with the reference date, as is nominated
by the scheme administrator (or if no day is nominated by the
scheme administrator, is the reference date).
15
      (4)
For each other unsecured pension year falling within a reference period, the
basis amount is the annual amount of the relevant annuity which could have
been purchased by the application of the sums and assets representing the
dependant’s unsecured pension fund—
(a)
if there has been no recent annuity purchase or recent additional
20
fund designation, on the nominated date, and
(b)
otherwise, immediately after the last annuity purchase or additional
fund designation,

(but subject to sub-paragraph (5)).
      (5)
On the occasion of each additional fund designation during an unsecured
25
pension year, the basis amount for that unsecured pension year is to be
recalculated in accordance with sub-paragraph (6).
      (6)
The basis amount for the unsecured pension year is the annual amount of
the relevant annuity which could have been purchased by the application of
the sums and assets representing the dependant’s unsecured pension fund
30
immediately after the additional fund designation.
      (7)
“Annuity purchase” means the purchase of a dependants’ scheme pension
or dependants’ annuity by the application of sums or assets representing the
whole or part of the dependant’s unsecured pension fund.
      (8)
“Additional fund designation” means the designation under the
35
arrangement of further sums and assets held for the purposes of the
arrangement as available for the payment of unsecured dependants’
pension to the dependant.
      (9)
An annuity purchase or additional fund designation is “recent” if it took
place during the period—
40
(a)
beginning with the reference date, and
(b)
ending with the last day of the immediately preceding unsecured
pension year.
     (10)
Paragraph 14 defines “relevant annuity”.
Dependant’s alternatively secured pension fund
45
25    (1)
For the purposes of this Part a dependant’s alternatively secured pension
fund in respect of an arrangement consists of such of the sums and assets
held for the purposes of the arrangement as—

Finance Bill
Schedule 29 — Registered pension schemes: authorised lump sums—supplementary
Part 1 — Lump sum rule
450

(a)
meet condition A or B, and
(b)
have not been subsequently applied for purchasing a dependants’
scheme pension or a dependants’ annuity or paid as dependants’
income withdrawal.
      (2)
Condition A is that the sums and assets were part of the dependant’s
5
unsecured pension fund in respect of the arrangement when the dependant
reached the age of 75.
      (3)
Condition B is that the sums and assets have at any time since the dependant
reached that age been designated as available for the payment of
alternatively secured dependants’ pension to the dependant.
10
Alternatively secured pension year and basis amount for alternatively secured pension year
26    (1)
“Alternatively secured pension year” means—
(a)
the period of 12 months beginning with the day on which the
dependant first becomes entitled to alternatively secured pension in
respect of the arrangement, and
15
(b)
each succeeding period of 12 months.
      (2)
When the dependant dies, the current alternatively secured pension year is
the last alternatively secured pension year and ends immediately before the
dependant’s death.
27    (1)
For the first alternatively secured pension year, the basis amount is the
20
annual amount of the relevant annuity which could have been purchased by
the application of the sums and assets representing the dependant’s
alternatively secured pension fund on the date on which the dependant first
became entitled to dependants’ alternatively secured pension in respect of
the arrangement.
25
      (2)
For each other alternatively secured pension year, the basis amount is the
annual amount of the relevant annuity which could have been purchased by
the application of the sums and assets representing the dependant’s
alternatively secured pension fund on the nominated date.
      (3)
“The nominated date” is such day within the period of 60 days ending with
30
the first day of the alternatively secured pension year as is nominated by the
scheme administrator (but if no day is nominated by the scheme
administrator, is the first day of the alternatively secured pension year).
      (4)
Paragraph 14 defines “relevant annuity”.
Schedule 29
35
Sections 163 and 165

Registered pension schemes: authorised lump sums—supplementary
Part 1
Lump sum rule
Pension commencement lump sum
1     (1)
For the purposes of this Part a lump sum is a pension commencement lump
40
sum if—