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Finance (No. 2) Bill


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

178

 

prescribed, as if it were the original dependants’ scheme

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

5

unsecured pension fund, or

(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

10

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

(“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—

15

(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

20

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.

25

      (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

30

(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

35

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

40

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

45

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

 

 

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

179

 

      (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.”

Surrender and allocation of rights etc.

5

38         

After section 172 insert—

“172A   

 Surrender

(1)   

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

surrenders or agrees to surrender—

(a)   

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

10

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

entitlement under an arrangement under the pension

scheme, or

(b)   

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

purposes of any arrangement under the pension scheme.

15

(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—

(a)   

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

person has a prospective entitlement under an arrangement

20

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

purposes of any arrangement relating to a member of the

pension scheme under the pension scheme.

25

(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—

(a)   

a surrender pursuant to a pension sharing order or provision,

(b)   

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

30

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

to become benefits or rights under another arrangement

under the pension scheme relating to the member or

35

dependant,

(d)   

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

in order to fund the making of an authorised surplus

payment,

(e)   

a surrender (or agreement to surrender) which constitutes an

40

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

Revenue.

(6)   

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

45

effect in relation to times before they are made.

 

 

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

180

 

(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

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—

5

(a)   

in consequence of the surrender, the actual or prospective

entitlement of another member (or dependant of another

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

respect of another member, to benefits under the scheme is

increased, and

10

(b)   

the two members are or have been connected persons.

(8)   

The amount of the unauthorised payment is the consideration that

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.

15

(9)   

In this section “surrender”, in relation to any benefit or right of a

member (or dependant of a member) of a pension scheme or other

person, includes any schemes, arrangements or understandings of

any kind (whether or not legally enforceable) the main purpose, or

one of the main purposes, of which is to reduce the member’s (or

20

dependant’s), or person’s, entitlement to the benefit or right.

(10)   

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.

(11)   

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

25

this section.

172B    

Increase in rights of connected person on death

(1)   

This section applies if—

(a)   

at any time after the death of a relevant member of a

registered pension scheme, there is an increase in the pension

30

rights of another member of the pension scheme which is

attributable to the death, and

(b)   

the dead member and other member were connected persons

immediately before the death.

(2)   

A member of a registered pension scheme is a relevant member if,

35

immediately before his death, any of his rights under the pension

scheme are—

(a)   

rights to benefit to which the member (or any dependant of

the member) has a prospective entitlement under an

arrangement under the pension scheme, or

40

(b)   

rights representing the member’s unsecured pension fund,

alternatively secured pension fund, dependant’s unsecured

pension fund or dependant’s alternatively secured pension

fund in respect of an arrangement under the pension scheme.

(3)   

There is at any time an increase in the pension rights of the other

45

member of the pension scheme which is attributable to the death if—

(a)   

the consideration which might be expected to be received in

respect of an assignment (or assignation) of the benefits to

 

 

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

181

 

which he is actually or prospectively entitled under the

pension scheme at that time, exceeds

(b)   

the consideration which might be expected to be received in

respect of such an assignment (or assignation) immediately

before that time,

5

   

in consequence of the death (ignoring for the purposes of paragraphs

(a) and (b) any power to reduce the entitlement to the benefits).

(4)   

The pension scheme is to be treated as making an unauthorised

payment to the other member (or to the other member’s personal

representatives) of an amount equal to the excess (but subject to

10

subsection (6)).

(5)   

The amount which would (apart from this subsection) constitute the

unauthorised payment is to be reduced by so much of the excess as

arises—

(a)   

from the payment of any transfer lump sum death benefit in

15

respect of the dead member so as to become held for the

purposes of, or to represent accrued rights under, an

arrangement relating to the other member,

(b)   

from the other member becoming entitled to pension death

benefits or lump sum death benefits in respect of the dead

20

member, or

(c)   

in any manner prescribed by regulations made by the Board

of Inland Revenue.

(6)   

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

effect in relation to times before they are made.

25

(7)   

This section does not apply if—

(a)   

at the time of the increase mentioned in subsection (1)(a)

there at least 20 members of the pension scheme, and

(b)   

the benefits to which each of them is actually or prospectively

entitled under the pension scheme are increased at the same

30

rate in consequence of the death.

(8)   

This section does not apply if the increase in the pension rights of the

other member is brought about by an assignment (or agreement to

assign) within section 172.

(9)   

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

35

this section.

172C    

Allocation of unallocated employer contributions

(1)   

This section applies if—

(a)   

contributions are paid under a registered pension scheme by

an employer otherwise than in respect of any individual,

40

(b)   

in any tax year any of the contributions become held for the

purposes of the provision of benefits to or in respect of a

member of the pension scheme under any relevant

arrangement or arrangements (“the allocated contributions”),

(c)   

the amount of the allocated contributions exceeds the

45

permitted maximum, and

(d)   

the member and the employer, or the member and any

person connected with the employer at any time during the

 

 

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

182

 

tax year, are connected persons at any time during the tax

year.

(2)   

An arrangement is a relevant arrangement if it is—

(a)   

a money purchase arrangement that is not a cash balance

arrangement, or

5

(b)   

a hybrid arrangement under which the benefits that may be

provided to or in respect of the member are, or include,

money purchase benefits other than cash balance benefits.

(3)   

“The permitted maximum” is—

(a)   

the maximum amount of relief to which the member is

10

entitled under section 188 (relief for contributions) in respect

of relievable pension contributions paid during the tax year

(see section 190), less

(b)   

the amount of any contributions paid by employers under

any registered pension scheme in respect of the member in

15

the tax year.

(4)   

But if the member is a also a member of one or more other registered

pension schemes, the permitted maximum in relation to each of the

registered pension schemes of which he is a member is—equation: over[times[char[P],char[M]],char[N]]

   

where—

20

PM is the amount arrived at under subsection (3), and

N is the number of registered pension schemes of which he is a

member.

(5)   

The pension scheme is to be treated as making an unauthorised

payment to the member (or to the member’s personal

25

representatives).

(6)   

The amount of the unauthorised payment is the amount by which

the amount of the allocated contributions exceeds the permitted

maximum.

(7)   

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

30

this section.

172D    

Limit on increase in benefits

(1)   

This section applies where, at any time during any pension input

period in respect of a relevant arrangement relating to a member of

an occupational pension scheme that is a registered pension scheme,

35

the member and—

(a)   

a sponsoring employer, or

(b)   

a person connected with a sponsoring employer.

   

are connected persons.

(2)   

If—

40

(a)   

the pension input amount for the pension input period in

respect of the relevant arrangement, exceeds

(b)   

the notional unconnected person input amount for the

pension input period in respect of the relevant arrangement,

 

 

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

183

 

   

the pension scheme is to be treated as making an unauthorised

payment to the member (or to the member’s personal

representatives) of an amount equal to the excess.

(3)   

A relevant arrangement is an arrangement under the pension

scheme that is—

5

(a)   

a defined benefits arrangement,

(b)   

a cash balance arrangement, or

(c)   

a hybrid arrangement under which the benefits that may be

provided to or in respect of the member are, or include,

defined benefits or cash balance benefits.

10

(4)   

The pension input amount for a pension input period in respect of

the relevant arrangement is to be determined in accordance with—

(a)   

sections 230 to 232 if the relevant arrangement is a cash

balance arrangement,

(b)   

sections 234 to 236 if it is a defined benefits arrangement, and

15

(c)   

section 237 if it is a hybrid arrangement,

   

treating references in those sections to the individual as to the

member and treating section 237 as if the references to input amount

B were omitted.

(5)   

The notional unconnected person input amount for the pension

20

input period in respect of the relevant arrangement is what the

pension input amount, as so determined, would have been if the

member were connected with—

(a)   

a sponsoring employer, or

(b)   

a person connected with a sponsoring employer,

25

   

at no time during the pension input period.

(6)   

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

this section.”

Restriction of employers’ relief in respect of contributions

39         

After section 196 insert—

30

“196A   

 Power to restrict relief

(1)   

The Board of Inland Revenue may make regulations for restricting

the extent to which contributions paid by an employer under a

registered pension scheme in respect of an individual are subject to

relief in circumstances in which subsection (2) or (3) applies (or both

35

do).

(2)   

This subsection applies where any of the benefits which will or may

be payable to or in respect of the individual under the registered

pension scheme will be payable only if relevant benefits expected to

be so paid under an employer-financed retirement benefits scheme

40

are not so paid.

(3)   

This subsection applies where, because relevant benefits are or may

be payable to or in respect of the individual under an employer-

financed retirement benefits scheme, the aggregate of the amount of

any sums and the market value of any assets—

45

(a)   

held for the purposes of, or

 

 

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

184

 

(b)   

representing accrued rights under,

   

the registered pension scheme which may be transferred by way of a

recognised transfer in respect of the individual will or may be less

than it otherwise would be.

(4)   

The reference in subsection (1) to contributions paid by an employer

5

being subject to relief is to—

(a)   

their being deductible in computing the amount of the profits

of the employer for the purposes of Part 2 of ITTOIA 2005

(trading income) or Case I or II of Schedule D,

(b)   

their being expenses of management of the employer for the

10

purposes of section 75 of ICTA (expenses of management:

companies with investment business), or

(c)   

their being brought into account at Step 1 in section 76(7) of

ICTA (expenses of insurance companies) in respect of the

employer,

15

   

(depending on which is appropriate in relation to the employer).

(5)   

In this section—

“employer-financed retirement benefits scheme”, and

“relevant benefits”,

   

have the same meaning as in Chapter 2 of Part 6 of ITEPA 2003 (see

20

sections 393A and 393B of that Act).”

40         

After section 246 insert—

“246A   

 Case where no relief for provision by an employer

(1)   

An employer’s expenses of providing relevant benefits to or in

respect of a present or former employee (“the employee”) under an

25

employer-financed retirement benefits scheme (whether or not by

the making of contributions under the scheme) are not subject to

relief if subsection (2) applies.

(2)   

This subsection applies where—

(a)   

the provision of the relevant benefits results in a reduction in

30

the benefits payable to or in respect of the employee under a

registered pension scheme, or

(b)   

a reduction in the benefits payable to or in respect of the

employee under a registered pension scheme results in the

provision of the relevant benefits.

35

(3)   

But if the extent to which contributions paid by the employer under

the registered pension scheme in respect of the employee are subject

to relief has been restricted in accordance with regulations under

section 196A, the employer’s expenses of providing the relevant

benefits are not prevented from being subject to relief to the extent

40

that is just and reasonable.

(4)   

The references in this section to expenses of an employer being

subject to relief are to—

(a)   

their being deductible in computing the amount of the profits

of the employer for the purposes of Part 2 of ITTOIA 2005

45

(trading income) or Case I or II of Schedule D,

 

 

 
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