Finance Bill

House of Commons

Session 2004 - 05
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Finance Bill

Finance Bill
Schedule 19 — Pension schemes etc.
320

Electronic payment
48
After section 255 insert—
“Payment
255A
Electronic payment
(1)
The Board of Inland Revenue may give directions requiring specified
5
persons to use electronic means for the making of specified
payments required to be made under or by virtue of this Part.
(2)
Directions under this section may make provision—
(a)
as to conditions that must be complied with in connection
with the use of electronic means for the making of any
10
payment,
(b)
for treating a payment as not having been made unless
conditions imposed by the directions are satisfied, and
(c)
for determining the time when a payment in accordance with
directions under this section is to be taken to be made.
15
(3)
Directions under this section may also make provision (which may
include provision for the application of conclusive or other
presumptions) as to the manner of proving for any purpose—
(a)
whether any use of electronic means for making a payment is
to be taken as having resulted in the payment being made,
20
(b)
the time of the making of any payment for the making of
which electronic means have been used, and
(c)
any other matter for which provision may be made by
directions under this section.
(4)
Directions under this section—
25
(a)
may be specific or general, and
(b)
may provide that the conditions of any authorisation or
requirement imposed by the directions are to be taken to be
satisfied only where the Inland Revenue is satisfied as to
specified matters.
30
(5)
Directions under this section may—
(a)
suspend for any period during which the use of electronic
means for the making of payments is impossible or
impractical, any requirements imposed by the directions
relating to the use of such means,
35
(b)
substitute alternative requirements for the suspended ones,
and
(c)
make any provision that is necessary in consequence of the
imposition of the substituted requirements.
(6)
Directions under this section may—
40
(a)
make different provision for different cases,
(b)
make such incidental, supplementary, consequential and
transitional provision in connection with any provision
contained in such directions as the Board of Inland Revenue
thinks fit.
45
(7)
In this section—

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“the Inland Revenue” includes any person who for the purposes
of the electronic means of payment is acting under the
authority of the Board of Inland Revenue, and
“specified” means specified in a direction under this section.
255B
Payments to be cleared payments
5
(1)
A payment made to the Board of Inland Revenue or the Inland
Revenue under or by virtue of this Part (otherwise than in cash) is to
be treated as not having been made until the earliest date on or
before which all the transactions that need to be completed before the
whole amount of the payment becomes available to the Board are
10
capable of being completed.
(2)
In this section “the Inland Revenue” includes any person who is
acting under the authority of the Board of Inland Revenue.”
Insurance company liable as scheme administrator
49    (1)
After section 273 insert—
15
“273A
Insurance company liable as scheme administrator
(1)
The Board of Inland Revenue may make regulations in relation to
cases where an insurance company makes a payment of—
(a)
a pension protection lump sum death benefit,
(b)
an annuity protection lump sum death benefit, or
20
(c)
an unsecured pension fund lump sum death benefit,

which (by virtue of section 161(3) and (4)) is treated for the purposes
of Chapter 3 as made by a registered pension scheme.
(2)
The regulations may provide that the insurance company—
(a)
is to be treated as the scheme administrator for the purposes
25
of the operation of section 206 in relation to the lump sum
death benefit, and
(b)
is responsible for the discharge of all obligations imposed on
the scheme administrator by or under this Part so far as
related to the liability imposed by that section to pay tax in
30
respect of it.
(3)
Where an insurance company is liable to pay any tax or interest, or is
responsible for the discharge of any other obligation, by virtue of
regulations under this section, no other person is liable to pay that
tax, or responsible for the discharge of that obligation, under sections
35
270 to 273.”
      (2)
In section 274(3)(b) (liabilities and other obligations under certain sections
not affected by pension scheme being terminated or ceasing to be
registered), insert at the end “or regulations under section 273A”.

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Schedule 19 — Pension schemes etc.
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Power to split schemes
50
Before section 275 insert—
“274A
Power to split schemes
(1)
The Board of Inland Revenue may make regulations for and in
connection with treating registered pension schemes to which this
5
section applies as if they were a number of separate registered
pension schemes for such of the purposes of this Part and of
provision made under it as are prescribed by the regulations.
(2)
This section applies to pension schemes prescribed, or of a
description prescribed, by the regulations.
10
(3)
The provision that may be made by the regulations may, in
particular, include—
(a)
provision as to who is to be treated as the scheme
administrator in relation to each of the separate pension
schemes, and
15
(b)
any such other modifications of the provision made by and
under this Part as appears appropriate in consequence of, or
otherwise in connection with, provision made under
subsection (1) (including provision so made by virtue of
paragraph (a) of this subsection).
20
(4)
The regulations may make different provision for different cases.”
Power to modify rules of existing schemes
51
In paragraph 3(2) of Schedule 36 (power to modify rules of existing schemes:
modifications to have effect until earlier of time when rules amended and
end of tax year 2008-09), for the words after “the pension scheme” substitute
25
“which state that the modifications no longer apply in relation to it take
effect, or
(b)
the end of the tax year 2010-11 or such later time as the
Board of Inland Revenue may by regulations prescribe.”
Primary and enhanced protection: valuation of uncrystallised rights
30
52    (1)
Schedule 36 (transitional provisions) is amended as follows.
      (2)
Paragraph 9 (valuation of uncrystallised rights under pension schemes
within paragraph 1(1)(a) to (d)) is amended as follows.
      (3)
In sub-paragraph (2) (alternative values)—
(a)
omit “the lower of”, and
35
(b)
for “and” at the end of paragraph (a) substitute “or (if lower)”.
      (4)
In sub-paragraph (4) (the maximum permitted pension), after “means”
insert—
“(a)
in the case of an arrangement under a pension scheme
which immediately before 6th April 2006 was within
40
section 611(1)(a) of ICTA, the maximum annual pension
that could be paid to the individual under the pension
scheme on 5th April 2006, and
(b)
in any other case,”.

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      (5)
In sub-paragraph (5) (assumptions)—
(a)
in paragraph (a), at the beginning insert “in the case of any
arrangement, that” and for “2006, that” substitute “2006”,
(b)
after that paragraph insert—
“(aa)
in the case of an arrangement within sub-
5
paragraph (4)(a), that the valuation assumptions
apply (see section 277),”, and
(c)
in paragraph (b), at the beginning insert “in the case of any other
arrangement, that” and for “scheme, that” substitute “scheme”.
      (6)
Paragraph 26 (lump sum protection: limit on value of uncrystallised rights
10
under pension schemes within paragraph 1(1)(a) to (d)) is amended as
follows.
      (7)
In sub-paragraph (2) (alternative values)—
(a)
omit “the lower of”, and
(b)
for “and” at the end of paragraph (a) substitute “or (if lower)”.
15
      (8)
In sub-paragraph (3) (the maximum permitted lump sum), after “means”
insert—
“(a)
in the case of an arrangement under a pension scheme
which immediately before 6th April 2006 was within
section 611(1)(a) of ICTA, the maximum lump sum that
20
could be paid to the individual under the pension scheme
on 5th April 2006, and
(b)
in any other case,”.
      (9)
In sub-paragraph (4) (assumptions)—
(a)
in paragraph (a), at the beginning insert “in the case of any
25
arrangement, that” and for “2006, that” substitute “2006”,
(b)
after that paragraph insert—
“(aa)
in the case of an arrangement within sub-
paragraph (3)(a), that the valuation assumptions
apply (see section 277),”, and
30
(c)
in paragraph (b), at the beginning insert “in the case of any other
arrangement, that” and for “scheme, that” substitute “scheme”.
Enhanced protection
53    (1)
Schedule 36 (transitional provisions) is amended as follows.
      (2)
Paragraph 12 (enhanced protection) is amended as follows.
35
      (3)
In sub-paragraph (2) (circumstances in which paragraph ceases to apply),
after paragraph (a) insert—
“(aa)
there is an impermissible transfer into the arrangement or
any of the arrangements (see paragraph 17A),”.
      (4)
In sub-paragraph (3) (effect of enhanced protection), for the words after “an
40
individual” substitute—
“(a)
there is no liability to the lifetime allowance charge in
respect of the individual, and
(b)
the payment of a lifetime allowance excess lump sum to
the individual is not permitted by the lump sum rule (see
45
section 166).”

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      (5)
In sub-paragraphs (5) and (6) (no enhanced protection if unsurrendered
relevant excess), for “9” substitute “9(3)”.
      (6)
In sub-paragraph (9)—
(a)
in paragraph (a), for “and 14” substitute “, 14 and 17A(1) and (2)”,
and
5
(b)
in paragraph (b), for “and 15” substitute “, 15 and 17A(3)”.
      (7)
In paragraph 13(a) (loss of enhanced protection: relevant benefit accrual in
case of money purchase arrangement that is not a cash balance
arrangement), after “the arrangement” insert “or, where the arrangement
has been a hybrid arrangement, if a relevant contribution was so paid at any
10
time after 5th April 2006,”.
      (8)
Paragraph 14 (loss of enhanced protection: relevant benefit accrual) is
amended as follows.
      (9)
In sub-paragraph (1)(c) (relevant benefit accrual: relevant contributions
consisting in employer’s contribution becoming held for individual), for “by
15
an employer of the individual otherwise than” substitute “otherwise than by
or on behalf of the individual or by an employer of the individual”.
     (10)
In sub-paragraph (2) (contributions which are not relevant contributions)—
(a)
for the words from the beginning to “minimum” substitute
“Minimum”, and
20
(b)
insert at the end “are not relevant contributions for the purposes of
paragraph 13(a)”.
     (11)
Paragraph 16 (enhanced protection: post-commencement earnings limit for
capped individuals) is amended as follows.
     (12)
In sub-paragraph (1) (individuals to whom paragraph applies), for “whom
25
section 590C of ICTA (earnings cap) had effect in” substitute “whom—
(a)
section 590C of ICTA or paragraph 20 of Schedule 6 to FA
1989 (earnings cap) had effect, or
(b)
provision similar to section 590C of ICTA had effect by
virtue of conditions imposed under section 591 of that Act
30
(discretionary approval),

            in”.
     (13)
In sub-paragraph (5) (appropriate three year period), for “the time when the
first relevant event occurs” substitute “the earliest of—
(a)
the first relevant event,
35
(b)
the individual leaving the employment to which the
arrangement relates, and
(c)
the individual’s death.”
     (14)
After that sub-paragraph insert—
   “(5A)
Where the appropriate three year period ends otherwise than with
40
the first relevant event, Amount B is what it would be apart from
this sub-paragraph increased by whichever is the greatest of—
(a)
the percentage by which an amount would be increased if
it were increased for the period beginning with the date on
which it ends and ending with the date on which the
45
relevant event occurs at an annual rate of 5%,

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(b)
the percentage by which an amount would be increased if
it were increased for that period at an annual percentage
rate referred to in regulations made by the Board of Inland
Revenue, or
(c)
the percentage by which the retail prices index for the
5
month in which the first relevant event occurs is higher
than that for the month in which the appropriate period
ends.”
     (15)
In paragraph 17 (enhanced protection: post-commencement earnings limit
for other individuals), after sub-paragraph (5) insert—
10
    “(6)
Where the appropriate three year period ends otherwise than with
the first relevant event, Amount D is what it would be apart from
this sub-paragraph increased by whichever is the greatest of—
(a)
the percentage by which an amount would be increased if
it were increased for the period beginning with the date on
15
which it ends and ending with the date on which the
relevant event occurs at an annual rate of 5%,
(b)
the percentage by which an amount would be increased if
it were increased for that period at an annual percentage
rate referred to in regulations made by the Board of Inland
20
Revenue, or
(c)
the percentage by which the retail prices index for the
month in which the first relevant event occurs is higher
than that for the month in which the appropriate period
ends.”
25
     (16)
After that paragraph insert—
“17A  (1)
There is an impermissible transfer into a relevant existing
arrangement relating to an individual under a pension scheme in
a case where the relevant existing arrangement is a money
purchase arrangement that is not a cash balance arrangement if—
30
(a)
sums or assets held for the purposes of, or representing
rights under, an arrangement relating otherwise than to
the individual are transferred so as to become held for the
purposes of the relevant existing arrangement, otherwise
than pursuant to a pension sharing order or provision,
35
(b)
sums or assets which are neither held for the purposes of,
nor represent rights under, a pension scheme are so
transferred, or
(c)
a transfer lump sum death benefit is paid so as to become
held for the purposes of, or to represent accrued rights
40
under, the relevant existing arrangement.
      (2)
Sub-paragraph (1) applies where the relevant existing
arrangement has been a hybrid arrangement as if the references to
sums or assets being transferred, or to a transfer lump sum death
benefit being paid, were to transfer or payment at any time after
45
5th April 2006.
      (3)
There is an impermissible transfer into a relevant existing
arrangement relating to an individual under a pension scheme in
a case where the relevant existing arrangement is a cash balance
arrangement or a defined benefits arrangement, if it becomes a
50

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money purchase arrangement that is not a cash balance
arrangement.”
Transitional provisions: persons who may take benefits before normal minimum pension age
54    (1)
Schedule 36 (transitional provisions) is amended as follows.
      (2)
In paragraph 19(5) (individuals permitted to take pension before normal
5
minimum pension age), omit “and the pension scheme”.
      (3)
In the heading before paragraph 21, for “pension” substitute “benefit”.
      (4)
Paragraph 22 (right to take pension before normal minimum pension age:
protected pension scheme where original pension scheme within paragraph
1(1)(a), (b), (c), (d) or (e)) is amended as follows.
10
      (5)
In sub-paragraph (4)(a) (entitlement to pension at age of less than 55), for “a
pension” substitute “any benefit”.
      (6)
In sub-paragraph (7) (retirement condition)—
(a)
in paragraph (a), for “pensions” substitute “benefits”, and
(b)
in paragraph (b), for “a pension” substitute “any benefit”.
15
      (7)
In sub-paragraph (8) (member’s protected pension age), for “a pension”
substitute “any benefit”.
Transitional provisions: block transfers
55    (1)
Schedule 36 (transitional provisions) is amended as follows.
      (2)
Paragraph 22 (right to take pension before normal minimum pension age:
20
protected pension scheme where original pension scheme within paragraph
1(1)(a), (b), (c), (d) or (e)) is amended as follows.
      (3)
In sub-paragraph (5) (condition B: membership due to block transfer from
original pension scheme), for the words after “the pension scheme”
substitute “(“a transferee pension scheme”) as a result of—
25
(a)
a block transfer from the pension scheme (“the original
pension scheme”) in relation to which condition A is met
to the transferee pension scheme, or
(b)
a block transfer to the transferee pension scheme from a
pension scheme that was a transferee pension scheme in
30
relation to the original pension scheme by virtue of the
previous application of paragraph (a) or the previous
application (on one or more occasions) of this paragraph.”
      (4)
For paragraph (b) of sub-paragraph (6) substitute—
“(b)
either the member was not a member of the pension
35
scheme to which the transfer is made before the transfer or
he has been a member of that pension scheme for no longer
than such period as is prescribed by regulations made by
the Board of Inland Revenue.”
      (5)
In paragraph 23(5) (right to take pension before normal minimum pension
40
age: condition B in case of protected pension scheme where original pension
scheme within paragraph 1(1)(f) or (g)), for the words after “the pension