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Finance Bill
Schedule 19 — Pension schemes etc.

306

 

(c)   

5% of the aggregate of the amounts of the lump sums on

which there is no liability to income tax to which the

member has become entitled in connection with scheme

pensions under the pension scheme before his death.

      (4)  

But if the member became (actually) entitled to a scheme pension

5

under the pension scheme during the pre-death year, sub-

paragraph (3)(a) has effect as if the amount of that scheme pension

which was payable to the member under the pension scheme in

the pre-death year were the amount which would have been

payable to him in the period of 12 months beginning with the date

10

on which he became entitled to it had he not died.

      (5)  

The “appropriate portion” of the initial member pension limit, in

relation to any pension payable under the pension scheme to a

dependant of the member in the post-death year, is—equation: over[char[P],times[char[A],char[P]]]

           

where—

15

P is the amount of that pension payable in the post-death

year, and

AP is the aggregate of the amounts of each of the pensions

payable under the pension scheme to dependants of the

member in the post-death year.

20

16C   (1)  

Where a pension is payable under the pension scheme to a

dependant of the member, otherwise than in excepted

circumstances, in—

(a)   

the period of 12 months beginning with the end of the post-

death year, or

25

(b)   

any succeeding period of 12 months,

           

(“the 12 months in question”), so much of the pension as exceeds

the current member pension limit is not a dependants’ scheme

pension.

      (2)  

But if—

30

(a)   

more than one pension is so payable to one of the

dependants in the 12 months in question, or

(b)   

pensions are so payable to more than one dependant of the

member in the 12 months in question,

           

(or both), so much of any of the pensions as exceeds the

35

appropriate portion of the current member pension limit is not a

dependants’ scheme pension.

      (3)  

“Excepted circumstances” means—

(a)   

that at the beginning of the period of 12 months in question

there are at least 50 pensioner members of the pension

40

scheme, and

(b)   

that the condition in subsection (4) is met.

      (4)  

The condition in this subsection is met if —

(a)   

the difference between CYP and PYP in the case of each

relevant existing pension is the same amount,

45

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

307

 

(b)   

the difference between CYP and PYP in the case of each

relevant existing pension is the same percentage of PYP, or

(c)   

in the case of each relevant existing pension the difference

between CYP and PYP is the aggregate of a percentage of

PYP and an amount which are both the same as those the

5

aggregate of which make up the difference between CYP

and PYP in the case of each other relevant existing pension.

      (5)  

In this section—

“relevant existing pension” means a pension payable to any

dependant of any member under the pension scheme

10

throughout the 12 months in question and the immediately

preceding period of 12 months,

CYP, in relation to a relevant existing pension, is the current

year pension, that is the amount of the pension payable in

the 12 months in question, and

15

PYP, in relation to a relevant existing pension, is the previous

year pension, that is the amount of the pension payable in

the immediately preceding period of 12 months.

      (6)  

The “current member pension limit”, in relation to the 12 month

period in question, is the initial member pension limit increased

20

by the aggregate of—

(a)   

the permitted margin, and

(b)   

the excepted circumstances amount.

      (7)  

The “permitted margin” is the amount by which the initial

member pension limit would be greater if it had been increased by

25

whichever of calculation A and calculation B gives the greater

amount.

      (8)  

Calculation A involves increasing the initial member pension limit

by the relevant annual percentage rate for the whole of the

period—

30

(a)   

beginning with the first month beginning after the end of

the post-death year (“the opening month”), and

(b)   

ending with the first month of the 12 months in question

(“the closing month”).

      (9)  

The relevant annual percentage rate is—

35

(a)   

if the relevant valuation factor in relation to the pension

scheme is a number greater than 20, the annual rate agreed

by the Inland Revenue and the scheme administrator, and

(b)   

otherwise, 5% per annum.

     (10)  

Calculation B involves increasing the initial member pension limit

40

by the relevant indexation percentage.

     (11)  

If the retail prices index for the closing month is higher than it was

for the opening month, the relevant indexation percentage is the

percentage increase in the retail prices index.

     (12)  

If it is not, the relevant indexation percentage is 0%.

45

     (13)  

The “excepted circumstances amount” is the aggregate of the

amounts of the relevant increases in pensions which were payable

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

308

 

under the pension scheme to dependants of the member in

excepted circumstances in any period or periods within

subsection (1)(a) or (b).

     (14)  

The relevant increase in the case of any pension payable in relation

to any 12 month period under the pension scheme to a dependant

5

of the member is the difference between CYP and PYP (for this

purpose reading the references in subsection (5) to the 12 months

in question as references to the 12 month period).

     (15)  

The “appropriate portion” of the current member pension limit, in

relation to any pension payable under the pension scheme to a

10

dependant of the member in the 12 months in question, is—equation: over[char[P],times[char[A],char[P]]]

           

where—

P is the amount of that pension payable in the 12 months in

question, and

AP is the aggregate of the amounts of each of the pensions

15

payable under the pension scheme to one or more

dependants of the member in the 12 months in question.”

Lifetime annuities and dependants’ annuities purchased together

29    (1)  

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

      (2)  

In sub-paragraph (1) (meaning of “dependants’ annuity), before paragraph

20

(a) insert—

“(za)   

it is purchased either together with a lifetime annuity

payable to the member or after the member’s death,”.

      (3)  

After that sub-paragraph insert—

   “(1A)  

For the purposes of sub-paragraph (1)(za) a dependants’ annuity

25

is purchased together with a lifetime annuity if the dependant’s

annuity is related to the lifetime annuity.”

30    (1)  

Paragraph 3 of Schedule 29 (pension commencement lump sum: applicable

amount) is amended as follows.

      (2)  

In sub-paragraph (4) (applicable amount where member entitled to lifetime

30

annuity to be one third of purchase price), for “of the annuity” substitute “of

the lifetime annuity and any related dependants’ annuity”.

      (3)  

After that sub-paragraph insert—

   “(4A)  

For the purposes of this Part a dependants’ annuity is related to a

lifetime annuity payable to a member of a registered pension

35

scheme—

(a)   

if they are purchased either in the form of a joint life

annuity or separately in circumstances in which the day on

which the one is purchased is no earlier than seven days

before, and no later than seven days after, the day on

40

which the other is purchased, and

(b)   

the dependant’s annuity will be payable to a dependant of

the member.”

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

309

 

31         

In the table in section 216(1) (benefit crystallisation events and amounts

crystallised), in benefit crystallisation event 4 (becoming entitled to lifetime

annuity), in column 2 (amount crystallised), insert at the end “and any

related dependants’ annuity”.

32         

In paragraph 4(1) of Schedule 32 (benefit crystallisation events 4: lifetime

5

annuity purchased from unsecured pension fund), for “is” substitute “or a

related dependants’ annuity is, or both the lifetime annuity and a related

dependants’ annuity are,”.

33         

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

appropriate place—

10

 

“related dependants’ annuity

paragraph 3(4A) of Schedule 29”.

 

Pension commencement lump sums

34    (1)  

Paragraph 1 of Schedule 29 (meaning of “pension commencement lump

sum”) is amended as follows.

      (2)  

In sub-paragraph (3)(b) (member must become entitled to lump sum in

15

connection with becoming entitled to relevant pension: lump sum and

pension to be under same arrangement), for “under the arrangement”

substitute “, otherwise than by virtue of the operation of paragraph 8(2) of

Schedule 28, under the pension scheme”.

      (3)  

After sub-paragraph (5) insert—

20

    “(6)  

The Board of Inland Revenue may by regulations provide that,

where incorrect income tax has been paid by the scheme

administrator in relation to the member by way of the lifetime

allowance charge in circumstances prescribed by the regulations,

a lump sum subsequently paid to the member in circumstances so

25

prescribed is to be treated as a pension commencement lump sum

even though either or both of the conditions in sub-paragraph

(1)(c) and (e) are not met.”

35    (1)  

Paragraph 3 of Schedule 29 (applicable amount limit) is amended as follows.

      (2)  

For sub-paragraph (5) (annuity purchase price: sums and assets to be

30

disregarded) substitute—

    “(5)  

There is to be deducted from that aggregate—

(a)   

if the sums or assets applied in (or in connection with) the

purchase of the annuity or any related dependants’

annuity consist of or include sums or assets representing

35

the whole or part of the member’s unsecured pension

fund, the aggregate of the amount of those sums and the

market value of those assets, and

(b)   

in any case, so much (if any) of the sums or assets applied

in (or in connection with) the purchase of the annuity or

40

any related dependants’ annuity as represents rights

which are attributable to a disqualifying pension credit.”

      (3)  

In sub-paragraph (7) (scheme pensions), in the definition of AC, insert at the

end “(disregarding paragraph 3 of Schedule 32).”

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

310

 

Recognised transfers

36         

In section 169 (recognised transfers), after subsection (1) insert—

“(1A)   

A transfer of sums or assets held for the purposes of, or representing

accrued rights under, a registered pension scheme to an insurance

company is to be treated as a recognised transfer if the sums or assets

5

had been applied by the pension scheme towards the provision of a

scheme pension or a dependants’ scheme pension (but subject to

regulations under subsections (1B) and (1C)).

(1B)   

The Board of Inland Revenue may by regulations provide that,

where any of the sums or assets transferred represent rights in

10

respect of a scheme pension to which a member of a registered

pension scheme has become entitled (“the original scheme

pension”)—

(a)   

the transfer is not a recognised transfer unless those sums

and assets are, after the transfer, applied towards the

15

provision of a scheme pension (a “new scheme pension”),

and

(b)   

if they are so applied, 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

20

it were the original scheme pension.

(1C)   

The Board of Inland Revenue may by regulations provide that,

where any of the sums or assets transferred represent rights in

respect of a dependants’ scheme pension to which a dependant of a

member of a registered pension scheme has become entitled in

25

respect of the member (“the original dependants’ scheme

pension”)—

(a)   

the transfer is not a recognised transfer unless those sums

and assets are, after the transfer, applied towards the

provision of a dependants’ scheme pension (a “new

30

dependants’ scheme pension”), and

(b)   

if they are so applied, the new dependants’ 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 dependants’ scheme

35

pension.

(1D)   

The Board of Inland Revenue may by regulations provide that,

where any of the sums or assets transferred represent—

(a)   

a person’s unsecured pension fund or dependant’s

unsecured pension fund, or

40

(b)   

a person’s alternatively secured pension fund or dependant’s

alternatively secured pension fund,

   

under an arrangement (“the old arrangement”), the transfer is not a

recognised transfer unless all of those sums and assets become held

under an arrangement under which no other sums or assets are held

45

(“the new arrangement”).

(1E)   

If regulations so provide they may make in relation to cases in which

the sums and assets become so held provision as to the treatment for

the purposes of any provision of this Part of—

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

311

 

(a)   

the sums and assets transferred, and

(b)   

the new arrangement,

   

including provision for treating the sums and assets transferred as

remaining, to such extent as is prescribed by the regulations and for

such of the purposes of this Part as are so prescribed, sums and assets

5

held under the old arrangement.”

Assignment

37    (1)  

Section 172 (assignment of benefit to which member has actual or

prospective entitlement to constitute unauthorised payment) is amended as

follows.

10

      (2)  

In subsection (1) (members), for the words after “agrees to assign”

substitute—

“(a)   

any benefit, other than an excluded pension, to which the

member (or any dependant of the member) has an actual or

prospective entitlement under the pension scheme, or

15

(b)   

any right in respect of any sums or assets held for the

purposes of any arrangement under the pension scheme.”

      (3)  

In subsection (3) (other persons), for the words after “agrees to assign”

substitute—

“(a)   

any benefit, other than an excluded pension, to which the

20

person has an actual or prospective entitlement under the

pension scheme in respect of a member of the pension

scheme, or

(b)   

any right in respect of any sums or assets held for the

purposes of any arrangement relating to the member under

25

the pension scheme.”

      (4)  

In subsection (5)(b) (amount of unauthorised payment), insert at the end

“and any power to reduce the entitlement to the benefit or right did not

exist.”

      (5)  

In subsection (6) (payments of benefits assigned not unauthorised

30

payments), after “benefit” insert “or right”.

      (6)  

For subsection (7) substitute—

“(7)   

An excluded pension is so much of any pension which under

pension rule 2 may continue to be paid after the member’s death as

may be so paid.”

35

Surrender and allocation of rights etc.

38         

After section 172 insert—

“172A   

 Surrender

(1)   

Subsection (2) applies if a member of a registered pension scheme

surrenders or agrees to surrender—

40

(a)   

any benefit, other than an excluded pension, to which the

member (or any dependant of the member) has a prospective

entitlement under an arrangement under the pension

scheme, or

 

 

Finance Bill
Schedule 19 — Pension schemes etc.

312

 

(b)   

any right in respect of any sums or assets held for the

purposes of any arrangement under the pension scheme.

(2)   

The pension scheme is to be treated as making an unauthorised

payment to the member.

(3)   

Subsection (4) applies if a person surrenders or agrees to surrender—

5

(a)   

any benefit, other than an excluded pension, to which the

person has a prospective entitlement under an arrangement

under the pension scheme relating to a member of a pension

scheme, or

(b)   

any right in respect of any sums or assets held for the

10

purposes of any arrangement relating to a member of the

pension scheme under the pension scheme.

(4)   

The pension scheme is to be treated as making an unauthorised

payment to the person in respect of the member.

(5)   

Subsections (2) and (4) do not apply to—

15

(a)   

a surrender pursuant to a pension sharing order or provision,

(b)   

a surrender (or agreement to surrender) by the member in

return for the conferring on a dependant of an entitlement to

benefits after the member’s death,

(c)   

a transfer of (or agreement to transfer) benefits or rights so as

20

to become benefits or rights under another arrangement

under the pension scheme relating to the member or

dependant,

(d)   

a surrender of (or agreement to surrender) benefits or rights

in order to fund the making of an authorised surplus

25

payment,

(e)   

a surrender (or agreement to surrender) which constitutes an

assignment (or agreement to assign) within section 172, or

(f)   

any surrender (or agreement to surrender) of a description

prescribed by regulations made by the Board of Inland

30

Revenue.

(6)   

Regulations under subsection (5)(f) may include provision having

effect in relation to times before they are made.

(7)   

Subsections (2) and (4) do not apply to the surrender of a benefit to

which the member (or a dependant of the member) has a prospective

35

entitlement, or to which the person has a prospective entitlement in

respect of a member, under an arrangement that is a defined benefits

arrangement or cash balance arrangement unless—

(a)   

in consequence of the surrender, the actual or prospective

entitlement of another member (or dependant of another

40

member) of the pension scheme, or of another person in

respect of another member, to benefits under the scheme is

increased, and

(b)   

the two members are or have been connected persons.

(8)   

The amount of the unauthorised payment is the consideration that

45

might be expected to be received if what is surrendered were

assigned by a transaction between parties at arm’s length and any

power to reduce the entitlement to the benefit or right did not exist.

 

 

 
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