Finance Bill

House of Commons

Session 2004 - 05
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 19 — Pension schemes etc.
299

    “(2)
An annuity does not fail to satisfy sub-paragraph (1)(c) by reason
of the operation of a pension sharing order or provision.
      (3)
The Board of Inland Revenue may by regulations make provision
in relation to cases in which a dependants’ annuity payable to a
person (“the original dependants’ annuity”) ceases to be payable
5
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 dependants’
annuity (a “new dependants’ annuity”) or a scheme
10
pension, lifetime annuity, short-term annuity, dependants’
scheme pension or dependants’ short-term annuity by the
other insurance company, or
(b)
sums or assets are transferred to the relevant registered
pension scheme.
15
      (4)
The regulations may provide that—
(a)
in a case where a new dependants’ annuity becomes
payable, the new dependants’ 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
20
the original dependants’ annuity, and
(b)
in any other case, the relevant registered pension scheme is
to be treated as making an unauthorised payment in
respect of the member of an amount equal to the aggregate
of the amount of the sums, and the market value of the
25
assets, transferred.
      (5)
For the purposes of sub-paragraphs (3) and (4) a registered
pension scheme is the relevant registered pension scheme if the
original dependants’ annuity was acquired using sums or assets
held for the purposes of the pension scheme.”
30
16    (1)
Paragraph 20 of Schedule 28 (dependants’ short-term annuity) is amended
as follows.
      (2)
In sub-paragraph (1) (meaning of “dependants’ short-term annuity”), for
“An” substitute “For the purposes of this Part an”.
      (3)
For paragraph (e) of that sub-paragraph (dependants’ short-term annuity to
35
be level 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—
40
   “(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 dependants’ short-term annuity
payable to a person (“the original dependants’ short-term
45
annuity”) ceases to 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

Finance Bill
Schedule 19 — Pension schemes etc.
300

towards the provision of either another dependants’ short-
term annuity (a “new dependants’ short-term annuity”) or
a scheme pension, lifetime annuity, short-term annuity,
dependants’ scheme pension or dependants’ annuity by
the other insurance company, or
5
(b)
sums or assets are transferred to the relevant registered
pension scheme.
     (1C)
The regulations may provide that—
(a)
in a case where a new dependants’ short-term annuity
becomes payable, the new dependants’ short-term annuity
10
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 dependants’ short-
term annuity, and
(b)
in any other case, the relevant registered pension scheme is
15
to be treated as making an unauthorised payment in
respect of the member of an amount equal to the aggregate
of the amount of the sums, and the market value of the
assets, transferred.
     (1D)
For the purposes of sub-paragraphs (1B) and (1C) a registered
20
pension scheme is the relevant registered pension scheme if the
original dependants’ short-term annuity was acquired using sums
or assets held for the purposes of the pension scheme.”
      (5)
Omit sub-paragraph (2) (which defines level annuity, increasing annuity
and relevant linked annuity).
25
17
In the table in section 280(2) (index of defined expressions), insert at the
appropriate place—

“dependants’ annuity
paragraph 17 of Schedule 28”

“dependants’ short-term
paragraph 20 of Schedule 28”

annuity

30

“short-term annuity
paragraph 6 of Schedule 28”.

Unsecured pension funds and alternatively secured pension funds
18    (1)
Paragraph 8 of Schedule 28 (member’s unsecured pension fund) is amended
as follows.
      (2)
In sub-paragraph (1) (sums and assets designated as available for the
35
payment of unsecured pension), for the words after “of the arrangement”
substitute “as are member-designated funds.”
      (3)
After that sub-paragraph insert—
   “(1A)
For the purposes of this Part sums or assets held for the purposes
of an arrangement are member-designated funds if they—
40
(a)
have been designated at any time under the arrangement
as available for the payment of unsecured pension, or

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Schedule 19 — Pension schemes etc.
301

(b)
arise, or (directly or indirectly) derive, from sums or assets
which have been so designated or which so arise or derive,

and have not been applied towards the provision of a scheme
pension.”
      (4)
In sub-paragraph (3) (“relevant uncrystallised funds”), for the words after
5
“means” substitute—
“(a)
if the arrangement is a cash balance
arrangement, a sum equal to what would, on
the valuation assumption in section 277(a), be
available for the provision of benefits to or in
10
respect of the member if the member became
entitled to them on reaching the age of 75, and
(b)
if it is not, such of the sums and assets held for
the purposes of the arrangement as are not
member-designated funds and have not been
15
applied towards the provision of a scheme
pension or a dependants’ scheme pension.”
      (5)
After that sub-paragraph insert—
    “(4)
If any sums or assets representing the member’s unsecured
pension fund in respect of an arrangement under the pension
20
scheme would (apart from this sub-paragraph) come to be taken
to represent another unsecured pension fund of his under the
pension scheme, or a dependant’s unsecured pension fund of his
under the pension scheme, they are to be treated as not doing so.”
19    (1)
Paragraph 10 of Schedule 28 (“unsecured pension years” etc.) is amended as
25
follows.
      (2)
In sub-paragraph (4) (“basis amount”)—
(a)
in paragraph (a), for “or recent additional fund designation”
substitute “, recent additional fund designation or recent pension
sharing event”, and
30
(b)
in paragraph (b), for “or additional fund designation” substitute “,
additional fund designation or pension sharing event”.
      (3)
After sub-paragraph (8) insert—
   “(8A)
“Pension sharing event” means the coming into operation of a
pension sharing order or provision relating to the sums and assets
35
representing the member’s unsecured pension fund.”
      (4)
In sub-paragraph (9) (“recent”), for “or additional fund designation”
substitute “, additional fund designation or pension sharing event”.
20    (1)
Paragraph 11 of Schedule 28 (member’s alternatively secured pension fund)
is amended as follows.
40
      (2)
In sub-paragraph (1)(b) (exclusion of certain sums and assets), for “for
purchasing a scheme pension or a lifetime annuity or paid as income
withdrawal” substitute “towards the provision of a scheme pension.”
      (3)
For sub-paragraphs (2) and (3) (conditions to be met) substitute—
    “(2)
Condition A is that they—
45

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Schedule 19 — Pension schemes etc.
302

(a)
were part of the member’s unsecured pension fund in
respect of the arrangement when the member reached the
age of 75, or
(b)
arise, or (directly or indirectly) derive, from sums or assets
within paragraph (a) or which so arise or derive.”
5
      (3)
Condition B is that they—
(a)
became held for the purposes of the arrangement after the
member reached the age of 75 or arise, or (directly or
indirectly) derive, from sums or assets which became so
held or which so arise or derive, or
10
(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 or arise, or (directly or indirectly) derive,
from sums or assets which have been so designated or
15
which so arise or derive.”
      (4)
After sub-paragraph (4) insert—
    “(5)
If any sums or assets representing the member’s alternatively
secured pension fund in respect of an arrangement under the
pension scheme would (apart from this sub-paragraph) come to be
20
taken to represent another alternatively secured pension fund of
his under the pension scheme, or a dependant’s alternatively
secured pension fund of his under the pension scheme, they are to
be treated as not doing so.”
21    (1)
Paragraph 22 of Schedule 28 (dependant’s unsecured pension fund) is
25
amended as follows.
      (2)
In sub-paragraph (1) (sums and assets designated as available for the
payment of dependants’ unsecured pension), for paragraphs (a) and (b)
substitute—
“(a)
as are dependant-designated funds, and
30
(b)
have not been applied towards the provision of a
dependants’ scheme pension.”
      (3)
After that sub-paragraph insert—
    “(2)
For the purposes of this Part sums or assets held for the purposes
of an arrangement are dependant-designated funds if they—
35
(a)
have been designated at any time under the arrangement
as available for the payment of dependant’s unsecured
pension to the dependant, or
(b)
arise, or (directly or indirectly) derive, from sums or assets
which have been so designated or which so arise or derive.
40
      (3)
If any sums or assets representing a dependant’s unsecured
pension fund in respect of an arrangement under the pension
scheme would (apart from this sub-paragraph)—
(a)
come to be taken to represent another dependant’s
unsecured pension fund of his under the pension scheme,
45
or an unsecured pension fund of his under the pension
scheme, or

Finance Bill
Schedule 19 — Pension schemes etc.
303

(b)
are applied towards the provision of a scheme pension or
a lifetime annuity,

they are to be treated as not doing so.”
22    (1)
Paragraph 24 of Schedule 28 (“unsecured pension years” etc.) is amended as
follows.
5
      (2)
In sub-paragraph (4) (“basis amount”)—
(a)
in paragraph (a), for “or recent additional fund designation”
substitute “, recent additional fund designation or recent pension
sharing event”, and
(b)
in paragraph (b), for “or additional fund designation” substitute “,
10
additional fund designation or pension sharing event”.
      (3)
After sub-paragraph (8) insert—
   “(8A)
“Pension sharing event” means the coming into operation of a
pension sharing order or provision relating to the sums and assets
representing the dependant’s unsecured pension fund.”
15
      (4)
In sub-paragraph (9) (“recent”), for “or additional fund designation”
substitute “, additional fund designation or pension sharing event”.
23    (1)
Paragraph 25 of Schedule 28 (dependant’s alternatively secured pension
fund) is amended as follows.
      (2)
In sub-paragraph (1)(b) (exclusion of certain sums and assets), for “for
20
purchasing a dependants’ scheme pension or a dependants’ annuity or paid
as dependants’ income withdrawal” substitute “towards the provision of a
dependants’ scheme pension”.
      (3)
For sub-paragraphs (2) and (3) (conditions to be met) substitute—
    “(2)
Condition A is that they—
25
(a)
were part of the dependant’s unsecured pension fund in
respect of the arrangement when the dependant reached
the age of 75, or
(b)
arise, or (directly or indirectly) derive, from sums or assets
within paragraph (a) or which so arise or derive.
30
      (3)
Condition B is that they have at any time since the dependant
reached the age of 75 been designated as available for the payment
of alternatively secured dependants’ pension to the dependant or
arise, or (directly or indirectly) derive, from sums or assets which
have been so designated or which so arise or derive.
35
      (4)
If any sums or assets representing a dependant’s alternatively
secured pension fund in respect of an arrangement under the
pension scheme would (apart from this sub-paragraph) come to be
taken to represent another dependant’s alternatively secured
pension fund of his under the pension scheme, or an alternatively
40
secured pension fund of his under the pension scheme, they are to
be treated as not doing so.”
24
In paragraph 3(8) of Schedule 29 (pension commencement lump sum:
deduction from applicable amount in case of scheme pension), for
“surrender” substitute “application”.
45

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Schedule 19 — Pension schemes etc.
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25    (1)
Schedule 32 (benefit crystallisation events: supplementary) is amended as
follows.
      (2)
In paragraph 3(1) (benefit crystallisation events 1, 2 and 4: prevention of
overlap), for “surrender” substitute “application”.
      (3)
In paragraph 5(2) (benefit crystallisation events 1 and 5: hybrid
5
arrangements), for “the sums or assets held for the purposes of the
arrangement are to be treated as having been designated” substitute “, under
paragraph 8(2) of Schedule 28, any relevant uncrystallised funds are to be
treated as having been designated under the arrangement”.
Meaning of “dependant”
10
26
In paragraph 15 of Schedule 28 (meaning of “dependant”), after sub-
paragraph (1) insert—
   “(1A)
If the rules of the pension scheme so provide, a person who was
married to the member when the member first became entitled to
a pension under the pension scheme is a dependant of the
15
member.”
Dependants’ scheme pensions
27    (1)
Paragraph 16 of Schedule 28 (dependants’ scheme pension) is amended as
follows.
      (2)
Omit sub-paragraph (1) (special provisions for pension scheme with fewer
20
than 50 members).
      (3)
In sub-paragraph (2) (pension scheme with 50 or more members)—
(a)
for “In the case of a pension scheme with 50 or more members, a”
substitute “A”, and
(b)
omit sub-paragraph (2)(b) and the word “and” before it.
25
      (4)
After that sub-paragraph insert—
    (2A)
The Board of Inland Revenue may by regulations make provision
in relation to cases in which a dependants’ scheme pension
payable to a dependant of a member of a registered pension
scheme by an insurance company (“the original dependants’
30
scheme pension”) ceases to 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 dependants’
35
scheme pension (a “new dependants’ scheme pension”) or
a scheme pension, lifetime annuity, short-term annuity,
dependants’ annuity or dependants’ short-term annuity
by the other insurance company, or
(b)
sums or assets are transferred to the relevant registered
40
pension scheme.
     (2B)
The regulations may provide that—
(a)
in a case where a new dependants’ scheme pension
becomes payable, the new dependants’ scheme pension is
to be treated, to such extent as is prescribed by the
45

Finance Bill
Schedule 19 — Pension schemes etc.
305

regulations and for such of the purposes of this Part as are
so prescribed, as if it were the original dependants’ scheme
pension, and
(b)
in any other case, the relevant registered pension scheme is
to be treated as making an unauthorised payment in
5
respect of the member of an amount equal to the aggregate
of the amount of the sums, and the market value of the
assets, transferred.
     (2C)
For the purposes of sub-paragraphs (2A) and (2B) a registered
pension scheme is the relevant registered pension scheme if the
10
original dependants’ scheme pension was acquired using sums or
assets held for the purposes of the pension scheme.”
      (5)
Omit sub-paragraphs (3) to (6) (condition to be satisfied).
28
In Schedule 28 (authorised pensions), after paragraph 16 insert—
“16A  (1)
Paragraphs 16B and 16C apply where—
15
(a)
the member dies after 5th April 2006,
(b)
he has reached the age of 75 before his death, and
(c)
at the time of his death he is actually or prospectively
entitled to one or more scheme pensions under the pension
scheme.
20
      (2)
References in this paragraph and paragraph 16B to a scheme
pension include a pension payable before 6th April 2006 which
would be a scheme pension if payable after that date.
16B   (1)
Where a pension is payable under the pension scheme to a
dependant of the member in the period of 12 months beginning
25
with the date of the member’s death (“the post-death year”), so
much of the pension as exceeds the initial member pension limit is
not a dependants’ scheme pension.
      (2)
But if—
(a)
more than one pension is so payable to one of the
30
dependants of the member in the post-death year, or
(b)
pensions are so payable to more than one dependant of the
member in the post-death year,

(or both), so much of any of the pensions as exceeds the
appropriate portion of the initial member pension limit is not a
35
dependants’ scheme pension.
      (3)
The “initial member pension limit” is (subject to sub-paragraph
(4)) the sum of—
(a)
the aggregate of the amounts of the scheme pensions to
which the member is actually entitled under the pension
40
scheme immediately before his death payable to the
member in the period of 12 months ending with the date of
his death (“the pre-death year”),
(b)
the aggregate of the amounts of the scheme pensions to
which the member is prospectively entitled under the
45
pension scheme at that time which would have been so
payable if he had been actually entitled to the pensions
throughout the pre-death year, and