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Finance Bill
Schedule 19 — Pension schemes etc.

293

 

(3)   

The relevant proportion of the scheme sanction charge is—equation: over[times[char[A],char[S],char[O]],times[char[U],char[M],char[P]]]

where—

ASO is the amount subject to the order, that is the aggregate of

the market value of any property and the amount of any

money transferred, or the amount of the sum paid, towards a

5

registered pension scheme pursuant to the order under

section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article

15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order

2005 in respect of the unauthorised member payment, and

UMP is the amount of the unauthorised member payment.

10

(4)   

But if ASO is greater than UMP, the relevant proportion of the

scheme sanction charge is the whole of it.”

Unauthorised member payments

5          

In section 161(5) (payment made to person who is connected with member,

or was connected with member at his death, to be treated as made in respect

15

of member), after “scheme to” insert “or in respect of”.

Unauthorised payments: loans to person connected with member or sponsoring employer

6     (1)  

Section 162 (meaning of “loan”) is amended as follows.

      (2)  

In subsection (3) (guarantee of loan to or in respect of member or sponsoring

employer to be treated as loan), after “scheme” insert “, or to or in respect of

20

a person who is connected with a member or sponsoring employer of a

registered pension scheme but is not a member or sponsoring employer of

the pension scheme,”.

      (3)  

In subsection (4) (debt of member or sponsoring employer not required to be

repaid at normal time to be treated as loan), after “registered pension

25

scheme” insert “or a person who is connected with a member or sponsoring

employer of a registered pension scheme but is not a member or sponsoring

employer of the pension scheme”.

      (4)  

After subsection (5) insert—

“(6)   

Section 839 of ICTA (connected persons) applies for the purposes of

30

this section.”

Abatement of public service pensions

7          

In section 165(3) (when a person becomes entitled to a pension), insert at the

end (not as part of paragraph (b)) “and, for this purpose, the abatement of a

scheme pension under a public service pension scheme is not to be taken to

35

affect the right to receive it.”

8     (1)  

Schedule 32 (benefit crystallisation events: supplementary) is amended as

follows.

      (2)  

In paragraph 9 (benefit crystallisation event 2: meaning of “P”), after sub-

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

294

 

paragraph (1) insert—

   “(1A)  

If the pension is under a public service pension scheme, any

abatement of the pension is to be left out of account in determining

the amount of the pension which will be payable for the purposes

of sub-paragraph (1).”

5

      (3)  

After that paragraph insert—

“Benefit crystallisation event 3: disregarding abatement

9A         

For the purposes of benefit crystallisation event 3, any abatement

of the scheme pension is to be left out of account in determining

for the purposes of column 1 —

10

(a)   

the increased annual rate of the pension, and

(b)   

the rate at which it was payable on the day on which the

individual became entitled to it.”

      (4)  

In paragraph 11 (benefit crystallisation event 3: permitted margin in case of

post-5th April 2006 pension), after sub-paragraph (7) insert—

15

    “(8)  

If the pension is under a public service pension scheme, any

abatement of the pension is to be left out of account in determining

for the purposes of this paragraph the annual amount of the

pension at the rate at which it was payable on the day on which the

individual became entitled to it.”

20

      (5)  

In paragraph 12 (benefit crystallisation event 3: permitted margin in case of

pre-5th April 2006 pension), after sub-paragraph (3) insert—

    “(4)  

If the pension is under a public service pension scheme, any

abatement of the pension is to be left out of account in determining

for the purposes of this paragraph the annual amount of the

25

pension at the rate at which it was payable on the day on which the

individual became entitled to it.”

      (6)  

In paragraph 13 (benefit crystallisation event 3: meaning of “XP”), after sub-

paragraph (2) insert—

    “(3)  

If the pension is under a public service pension scheme, any

30

abatement of the pension is to be left out of account in determining

for the purposes of sub-paragraph (1)—

(a)   

the increased annual rate of the pension, and

(b)   

the rate at which it was payable on the day on which the

individual became entitled to it.”

35

9          

In section 279(1) (definitions), before the definition of “the Board of Inland

Revenue” insert—

““abatement”, in relation to a scheme pension under a public

service pension scheme, means the reduction of the pension

(including its reduction to nil) in accordance with the rules of

40

the pension scheme by reason of re-employment in public

service,”.

10         

In the table in section 280(2) (index of defined expressions), insert at the

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

295

 

appropriate place—

 

“abatement

section 279(1)”.

 

Scheme pensions

11    (1)  

Paragraph 2 of Schedule 28 (scheme pensions) is amended as follows.

      (2)  

Omit sub-paragraph (1) (special provisions for pension scheme with fewer

5

than 50 members).

      (3)  

In sub-paragraph (2) (pension scheme with 50 or more members), for “In the

case of a pension scheme with 50 or more members, a” substitute “A”.

      (4)  

In sub-paragraph (3)(b) (no reduction in rate of pension)—

(a)   

for “in respect of any” substitute “at any time during any”, and

10

(b)   

for “in respect of the previous 12 month period” substitute “at the

relevant time”.

      (5)  

After that sub-paragraph insert—

   “(3A)  

“The relevant time” is—

(a)   

in the case of the first relevant 12 month period, the day on

15

which the member becomes entitled to the pension, and

(b)   

in the case of any other relevant 12 month period,

immediately before the beginning of that period.”

      (6)  

In sub-paragraph (4) (things not preventing condition in sub-paragraph (3)

being satisfied), omit “or” at the end of paragraph (b) and insert at the end—

20

“(d)   

the reduction of the pension in consequence of a pension

sharing order or provision,

(e)   

forfeiture of entitlement to the pension in circumstances

prescribed by regulations made by the Board of Inland

Revenue,

25

(f)   

the reduction of the pension in consequence of an order of

a court,

(g)   

if the pension is under a public service pension scheme, its

reduction by abatement, or

(h)   

the reduction of the pension in any other circumstances

30

prescribed by regulations made by the Board of Inland

Revenue.”

      (7)  

After that sub-paragraph insert—

   “(4A)  

In sub-paragraph (4) references to the reduction of a pension

include its ceasing to be payable (whether temporarily or

35

permanently).”

      (8)  

After sub-paragraph (6) insert—

   “(6A)  

The Board of Inland Revenue may by regulations provide that if—

(a)   

a scheme pension payable by an insurance company

selected by the scheme administrator of a registered

40

pension scheme (“the original scheme pension”) ceases to

be payable, and

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

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(b)   

in consequence of the transfer of sums or assets (or both)

from the insurance company to another insurance

company in connection with the original scheme pension

ceasing to be payable, another scheme pension becomes

payable by the other insurance company (“the new scheme

5

pension”),

           

the new scheme pension is to be treated, to such extent as is

prescribed by the regulations and for such of the purposes of this

Part as are so prescribed, as if it were the original scheme

pension.”

10

      (9)  

Insert at the end—

    “(8)  

Regulations under sub-paragraph (4)(e) and (h) may include

provision having effect in relation to times before they are made.”

12         

In Schedule 28 (authorised pensions), after paragraph 2 insert—

“2A   (1)  

Where this paragraph applies in relation to a pension payable to

15

the member, the pension scheme is to be treated as making an

unauthorised payment to the member of the appropriate amount.

      (2)  

This paragraph applies to a pension if it fails to satisfy the

condition in sub-paragraph (3) of paragraph 2—

(a)   

by reason of not complying with paragraph (a) of that sub-

20

paragraph, or

(b)   

by reason of not complying with paragraph (b) of that sub-

paragraph because a substantial reduction occurs in the

rate of the pension,

           

or if it is a pension the rate of which is reduced in accordance with

25

paragraph (b) of sub-paragraph (4) of paragraph 2 but the

reduction is part of avoidance arrangements.

      (3)  

For the purposes of sub-paragraph (2)(b) a substantial reduction

occurs in the rate of a pension if the rate at which the pension is

payable at any time during any relevant 12 month period (within

30

the meaning of paragraph 2(7)) is less than 80% of the rate payable

when the member became entitled to the pension.

      (4)  

For the purposes of sub-paragraph (2) “avoidance arrangements”

includes schemes, arrangements and understandings of any kind

(whether or not legally enforceable) the main purpose, or one of

35

the main purposes, of which is to increase the member’s

entitlement to a lump sum on which there is no liability to income

tax.

      (5)  

“The appropriate amount”, in relation to the pension, is the

amount of any lump sum on which there is no liability to tax to

40

which the member became entitled in connection with the

pension.

      (6)  

Once this paragraph has applied in relation to the pension, it does

not apply in relation to it again.

      (7)  

The application of this paragraph in relation to the pension does

45

not prevent any payments of the pension themselves being

unauthorised member payments.”

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

297

 

Annuities

13    (1)  

Paragraph 3 of Schedule 28 (lifetime annuity) is amended as follows.

      (2)  

For sub-paragraph (1)(d) (lifetime annuity to be level annuity, increasing

annuity or relevant linked annuity) substitute—

“(d)   

its amount either cannot decrease or falls to be determined

5

in any manner prescribed by regulations made by the

Board of Inland Revenue.”

      (3)  

After sub-paragraph (2) insert—

   “(2A)  

An annuity does not fail to satisfy sub-paragraph (1)(d) by reason

of the operation of a pension sharing order or provision.

10

     (2B)  

The Board of Inland Revenue may by regulations make provision

in relation to cases in which a lifetime annuity payable by an

insurance company (“the original lifetime annuity”) ceases to be

payable and in consequence of that—

(a)   

sums or assets (or both) are transferred from the insurance

15

company to another insurance company and are applied

towards the provision of either another lifetime annuity (a

“new lifetime annuity”) or a scheme pension, short-term

annuity, dependants’ scheme pension, dependants’

annuity or dependants’ short-term annuity by the other

20

insurance company, or

(b)   

sums or assets are transferred to the relevant registered

pension scheme.

     (2C)  

The regulations may provide that—

(a)   

in a case where a new lifetime annuity becomes payable,

25

the new lifetime annuity is to be treated, to such extent as

is prescribed by the regulations and for such of the

purposes of this Part as are so prescribed, as if it were the

original lifetime annuity, and

(b)   

in any other case, the relevant registered pension scheme is

30

to be treated as making an unauthorised payment to the

member of an amount equal to the aggregate of the

amount of the sums, and the market value of the assets,

transferred.

     (2D)  

For the purposes of sub-paragraphs (2B) and (2C) a registered

35

pension scheme is the relevant registered pension scheme if the

original lifetime annuity was acquired using sums or assets held

for the purposes of the pension scheme.”

      (4)  

Omit sub-paragraphs (3) to (6) (which define level annuity, increasing

annuity and relevant linked annuity).

40

14    (1)  

Paragraph 6 of Schedule 28 (short-term annuity) is amended as follows.

      (2)  

In sub-paragraph (1) (meaning of “short-term annuity”), for “An” substitute

“For the purposes of this Part an”.

      (3)  

For paragraph (e) of that sub-paragraph (short-term annuity to be level

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

298

 

annuity, increasing annuity or relevant linked annuity) substitute—

“(e)   

its amount either cannot decrease or falls to be determined

in any manner prescribed by regulations made by the

Board of Inland Revenue.”

      (4)  

After that sub-paragraph insert—

5

   “(1A)  

An annuity does not fail to satisfy sub-paragraph (1)(e) by reason

of the operation of a pension sharing order or provision.

     (1B)  

The Board of Inland Revenue may by regulations make provision

in relation to cases in which a short-term annuity payable by an

insurance company (“the original short-term annuity”) ceases to

10

be payable and in consequence of that—

(a)   

sums or assets (or both) are transferred from the insurance

company to another insurance company and are applied

towards the provision of either another short-term annuity

(a “new short-term annuity”) or a scheme pension, lifetime

15

annuity, dependants’ scheme pension, dependants’

annuity or dependants’ short-term annuity by the other

insurance company, or

(b)   

sums or assets are transferred to the relevant registered

pension scheme.

20

     (1C)  

The regulations may provide that—

(a)   

in a case where a new short-term annuity becomes

payable, the new short-term annuity is to be treated, to

such extent as is prescribed by the regulations and for such

of the purposes of this Part as are so prescribed, as if it were

25

the original short-term annuity, and

(b)   

in any other case, the relevant registered pension scheme is

to be treated as making an unauthorised payment to the

member of an amount equal to the aggregate of the

amount of the sums, and the market value of the assets,

30

transferred.

     (1D)  

For the purposes of sub-paragraphs (1B) and (1C) a registered

pension scheme is the relevant registered pension scheme if the

original short-term annuity was acquired using sums or assets

held for the purposes of the pension scheme.”

35

      (5)  

Omit sub-paragraph (2) (which defines level annuity, increasing annuity

and relevant linked annuity).

15    (1)  

Paragraph 17 of Schedule 28 (dependants’ annuity) is amended as follows.

      (2)  

In sub-paragraph (1) (meaning of “dependants’ annuity”), for “An”

substitute “For the purposes of this Part an”.

40

      (3)  

For paragraph (c) of that sub-paragraph (dependants’ annuity to be level

annuity, increasing annuity or relevant linked annuity) substitute—

“(c)   

its amount either cannot decrease or falls to be determined

in any manner prescribed by regulations made by the

Board of Inland Revenue,”.

45

      (4)  

For sub-paragraph (2) (which defines level annuity, increasing annuity and

relevant linked annuity) substitute—

 

 

 
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