Finance (No. 2) Bill

House of Commons

Session 2004 - 05
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Other Bills before Parliament

Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 10 — Pension schemes etc.
164

      (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
the main purposes, of which is to increase the member’s
entitlement to a lump sum on which there is no liability to income
5
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
which the member became entitled in connection with the
pension.
10
      (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
not prevent any payments of the pension themselves being
unauthorised member payments.”
15
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
20
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.
25
     (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
30
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
35
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,
40
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
45
to be treated as making an unauthorised payment to the
member of an amount equal to the aggregate of the

Finance (No. 2) Bill
Schedule 10 — Pension schemes etc.
165

amount of the sums, and the market value of the assets,
transferred.
     (2D)
For the purposes of sub-paragraphs (2B) and (2C) a registered
pension scheme is the relevant registered pension scheme if the
original lifetime annuity was acquired using sums or assets held
5
for the purposes of the pension scheme.”
      (4)
Omit sub-paragraphs (3) to (6) (which define level annuity, increasing
annuity and relevant linked annuity).
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
10
“For the purposes of this Part an”.
      (3)
For paragraph (e) of that sub-paragraph (short-term annuity to 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
15
Board of Inland Revenue.”
      (4)
After that sub-paragraph insert—
   “(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
20
in relation to cases in which a short-term annuity payable by an
insurance company (“the original short-term 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
25
towards the provision of either another short-term annuity
(a “new short-term annuity”) or a scheme pension, lifetime
annuity, dependants’ scheme pension, dependants’
annuity or dependants’ short-term annuity by the other
insurance company, or
30
(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 short-term annuity becomes
payable, the new short-term annuity is to be treated, to
35
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 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
40
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
pension scheme is the relevant registered pension scheme if the
45
original short-term annuity was acquired using sums or assets
held for the purposes of the pension scheme.”

Finance (No. 2) Bill
Schedule 10 — Pension schemes etc.
166

      (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”.
5
      (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,”.
10
      (4)
For sub-paragraph (2) (which defines level annuity, increasing annuity and
relevant linked annuity) substitute—
    “(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
15
in relation to cases in which a dependants’ annuity payable to a
person (“the original dependants’ 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
20
towards the provision of either another dependants’
annuity (a “new dependants’ annuity”) or a scheme
pension, lifetime annuity, short-term annuity, dependants’
scheme pension or dependants’ short-term annuity by the
other insurance company, or
25
(b)
sums or assets are transferred to the relevant registered
pension scheme.
      (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
30
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’ annuity, and
(b)
in any other case, the relevant registered pension scheme is
to be treated as making an unauthorised payment in
35
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.
      (5)
For the purposes of sub-paragraphs (3) and (4) a registered
pension scheme is the relevant registered pension scheme if the
40
original dependants’ annuity was acquired using sums or assets
held for the purposes of the pension scheme.”
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
45
“An” substitute “For the purposes of this Part an”.
      (3)
For paragraph (e) of that sub-paragraph (dependants’ short-term annuity to

Finance (No. 2) Bill
Schedule 10 — Pension schemes etc.
167

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—
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 dependants’ short-term annuity
payable to a person (“the original dependants’ short-term
10
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
towards the provision of either another dependants’ short-
term annuity (a “new dependants’ short-term annuity”) or
15
a scheme pension, lifetime annuity, short-term annuity,
dependants’ scheme pension or dependants’ 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 dependants’ short-term annuity
becomes payable, the new dependants’ 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
25
so prescribed, as if it were the original dependants’ short-
term 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
30
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
pension scheme is the relevant registered pension scheme if the
original dependants’ short-term annuity was acquired using sums
35
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).
17
In the table in section 280(2) (index of defined expressions), insert at the
appropriate place—
40

“dependants’ annuity
paragraph 17 of Schedule 28”

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

annuity

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

Finance (No. 2) Bill
Schedule 10 — Pension schemes etc.
168

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
payment of unsecured pension), for the words after “of the arrangement”
5
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—
(a)
have been designated at any time under the arrangement
10
as available for the payment of unsecured pension, or
(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.”
15
      (4)
In sub-paragraph (3) (“relevant uncrystallised funds”), for the words after
“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
20
available for the provision of benefits to or in
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
25
member-designated funds and have not been
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
30
pension fund in respect of an arrangement under the pension
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.”
35
19    (1)
Paragraph 10 of Schedule 28 (“unsecured pension years” etc.) is amended as
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
40
sharing event”, and
(b)
in paragraph (b), for “or additional fund designation” substitute “,
additional fund designation or pension sharing event”.

Finance (No. 2) Bill
Schedule 10 — Pension schemes etc.
169

      (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 member’s unsecured pension fund.”
      (4)
In sub-paragraph (9) (“recent”), for “or additional fund designation”
5
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.
      (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
10
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—
(a)
were part of the member’s unsecured pension fund in
respect of the arrangement when the member reached the
15
age of 75, or
(b)
arise, or (directly or indirectly) derive, from sums or assets
within paragraph (a) or which so arise or derive.”
      (3)
Condition B is that they—
(a)
became held for the purposes of the arrangement after the
20
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
(b)
if the arrangement is a relevant arrangement, have at any
time since the member reached that age been designated as
25
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
which so arise or derive.”
      (4)
After sub-paragraph (4) insert—
30
    “(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
taken to represent another alternatively secured pension fund of
his under the pension scheme, or a dependant’s alternatively
35
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
amended as follows.
      (2)
In sub-paragraph (1) (sums and assets designated as available for the
40
payment of dependants’ unsecured pension), for paragraphs (a) and (b)
substitute—
“(a)
as are dependant-designated funds, and
(b)
have not been applied towards the provision of a
dependants’ scheme pension.”
45

Finance (No. 2) Bill
Schedule 10 — Pension schemes etc.
170

      (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—
(a)
have been designated at any time under the arrangement
as available for the payment of dependant’s unsecured
5
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.
      (3)
If any sums or assets representing a dependant’s unsecured
pension fund in respect of an arrangement under the pension
10
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,
or an unsecured pension fund of his under the pension
scheme, or
15
(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.
20
      (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 “,
25
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.”
30
      (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
35
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—
40
(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.
45