Finance Bill

House of Commons

Session 2006 - 07
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Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 19 — Alternatively secured pensions and transfer lump sum death benefit etc
224

(b)
to purchase a scheme pension or dependants’ scheme
pension;
(c)
to purchase a lifetime annuity or dependants’ annuity.
(7)
Part 1 of Schedule 28 gives the meaning of expressions used in this
section so far as it relates to alternatively secured pension; and Part 2
5
of that Schedule gives the meaning of expressions used in this section
so far as it relates to dependants’ alternatively secured pension.”
15
In section 241(1) (scheme chargeable payment), after paragraph (a) insert—
“(aa)
a scheme chargeable payment which the pension scheme is to
be treated as having made by section 181A (minimum
10
alternatively secured pension etc), and”.
Charity lump sum death benefit
16    (1)
Paragraph 18 of Schedule 29 (charity lump sum death benefit) is amended as
follows.
      (2)
In sub-paragraph (1)(c), for “income withdrawal to which the member was
15
entitled” substitute “the member’s alternatively secured pension fund (or
what would be the member’s alternatively secured pension fund but for
paragraph 11(6) and (7) of Schedule 28)”.
      (3)
In sub-paragraph (1)(d), insert at the end “(or, if the member made no
nomination, selected by the scheme administrator).”
20
      (4)
In sub-paragraph (2)(d), for “dependants’ income withdrawal to which the
member was entitled” substitute “the dependant’s alternatively secured
pension fund”.
      (5)
In sub-paragraph (2)(e), for “(or, if the member made no nomination, by the
dependant).” substitute “or, if the member made no nomination, by the
25
dependant (or, if neither the member nor the dependant made a nomination,
selected by the scheme administrator).”
      (6)
In sub-paragraph (4), after “representing” insert “what is (or but for
paragraph 11(6) and (7) of Schedule 28 would be)”.
Discharge of liability to scheme chargeable payment
30
17
In section 268(6) (unauthorised payments surcharge and scheme chargeable
payments), for “(assignment)” substitute “, 172A, 172B, 172BA, 172C or 172D
or arises under section 181A”.
Non-UK schemes
18    (1)
Schedule 34 (non-UK schemes application of certain charges) is amended as
35
follows.
      (2)
In paragraph 1(6), omit the words from “but also” to the end.
      (3)
In paragraph 4(3), omit the words from “but also” to the end.

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Schedule 19 — Alternatively secured pensions and transfer lump sum death benefit etc
225

      (4)
After paragraph 7 insert—
“Unauthorised payment charge: alternatively secured pension etc
7ZA
The Commissions for Her Majesty’s Revenue and Customs may
by regulations make provision for—
(a)
a relieved member of a relevant non-UK scheme, or
5
(b)
a transfer member of such a scheme,

to be liable to the unauthorised payment charge in circumstances
which are the same as or similar to those in which the scheme
administrator of such a scheme is liable to the scheme sanction
charge by virtue of section 181A (minimum alternatively and
10
dependants’ alternatively secured pension).”
Inheritance tax
19
IHTA 1984 is amended as follows.
20    (1)
Section 151A (person dying with alternatively secured pension fund) is
amended as follows.
15
      (2)
For subsection (2) substitute—
“(2)
Tax shall be charged on the relevant amount as if it were part of the
value transferred by the transfer of value made on the member’s
death at the rate or rates at which it would be charged if it formed the
highest part of that value.”
20
      (3)
In subsection (3)(a), after “death” insert “but reduced by the amount of any
previously charged income tax”.
      (4)
After subsection (4) insert—
“(4A)
In subsection (3)(a) above “the amount of any previously charged
income tax” means the amount of any liability to income tax which
25
(after the member’s death but before the time when tax is charged on
the transfer of value treated as made by the member on death) has
arisen by virtue of the making of an unauthorised member payment
under Part 4 of the Finance Act 2004 relating to the member’s
alternatively secured pension fund.
30
(4B)
Subsection (4C) below applies where the maximum that could be
transferred by the chargeable transfer made (under section 4 above)
on the member’s death if it were to be wholly chargeable to tax at the
rate of nil per cent. exceeds—
(a)
the value actually transferred by that chargeable transfer (or
35
nil if there is no such chargeable transfer), less
(b)
any previously untaxed alternatively secured pension fund
amount.
(4C)
Where this subsection applies, tax is to be charged on the previously
untaxed alternatively secured pension fund amount as if the nil rate
40
band maximum were—

where—

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Schedule 19 — Alternatively secured pensions and transfer lump sum death benefit etc
226

UNRB is the unused nil-rate band, that is the excess mentioned
in subsection (4B) above, and
MUPR is the maximum unauthorised payment rate, that is the
maximum aggregate rate at which tax is chargeable under
Part 4 of the Finance Act 2004 in respect of an unauthorised
5
member payment.”
      (5)
In subsection (5), at the end of the definition of “dependants’ unsecured
pension” (but before “and”) insert—
“previously untaxed alternatively secured pension fund
amount” means so much of the aggregate mentioned in
10
subsection (3)(a) above as has not given rise to any liability to
tax by virtue of Part 4 of the Finance Act 2004 before tax is
charged on the transfer treated as made by the member on
death.”
      (6)
After that subsection insert—
15
“(6)
This section applies in relation to a member who would have an
alternatively secured pension fund immediately before death but for
sub-paragraphs (6) and (7) of paragraph 11 of Schedule 28 to the
Finance Act 2004 as if those sub-paragraphs were omitted (but
subject as follows).
20
(7)
In the case of such a member the references in subsection (3)(a) and
(b) to the member’s death are to the date on which the scheme
administrator becomes aware of the member’s death.”
21    (1)
Section 151B (relevant dependant with pension fund inherited from member
over 75) is amended as follows.
25
      (2)
In subsection (1)(b), after “before his death” insert “(or would have but for
paragraph 11(6) and (7) of Schedule 28 to the Finance Act 2004)”.
      (3)
Omit subsection (5).
22
After that section insert—
“151BA
Rate or rates of charge under section 151B
30
(1)
Tax charged under section 151B above shall be charged at the rate or
rates at which it would be charged on the death of the member if the
amount mentioned in subsection (3) of that section (as reduced
under subsection (4) of that section) (“the taxable amount”) had been
included in the aggregate mentioned in section 151A(3)(a) above (but
35
subject as follows).
(2)
The rate or rates at which tax is charged on the taxable amount shall
be determined as if the taxable amount had formed the very highest
part of the value of the member’s estate immediately before the
member’s death (above any amount which is part of that value apart
40
from this section).
(3)
The rate or rates at which tax is charged on the taxable amount shall
be determined on the assumptions that—
(a)
subsection (3)(b) of section 151A above were omitted, and
(b)
the references in subsections (4A) and (5) of that section to the
45
time when tax is charged on the transfer treated as made by

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Schedule 19 — Alternatively secured pensions and transfer lump sum death benefit etc
227

the member on death were to the time when tax is charged
under this section.
(4)
Subsection (5) below applies where, before the time when the
dependant dies or ceases to be a relevant dependant, there have been
one or more reductions of tax by virtue of the coming into force of a
5
substitution of a new Table in Schedule 1 to this Act since the
member’s death.
(5)
The rate or rates at which tax is charged under section 151B above is
to be determined as if the new Table effecting the reduction of tax (or
the most recent reduction of tax) had been in force at the time of the
10
member’s death.”
23    (1)
Section 151C (dependant dying with other pension fund) is amended as
follows.
      (2)
For subsection (2) substitute—
“(2)
Tax shall be charged on the relevant amount as if it were part of the
15
value transferred by the transfer of value made on the dependant’s
death at the rate or rates at which it would be charged if it formed the
highest part of that value.”
      (3)
In subsection (3)(a), after “death” insert “but reduced by the amount of any
previously charged income tax”.
20
      (4)
After that subsection insert—
“(3A)
In subsection (3)(a) above “the amount of any previously charged
income tax” means the amount of any liability to income tax which
(after the dependant’s death but before the time when tax is charged
on the transfer of value treated as made by the dependant on death)
25
has arisen by virtue of the making of an unauthorised member
payment under Part 4 of the Finance Act 2004 relating to the
dependant’s alternatively secured pension fund.
(3B)
Subsection (3C) below applies where the maximum that could be
transferred by the chargeable transfer made (under section 4 above)
30
on death if it were to be wholly chargeable to tax at the rate of nil per
cent. exceeds—
(a)
the value actually transferred by that chargeable transfer, less
(b)
any previously untaxed dependant’s alternatively secured
pension fund amount.
35
(3C)
Where this subsection applies, tax is to be charged on the previously
untaxed dependant’s alternatively secured pension fund amount as
if the nil rate band maximum were—

where—
UNRB is the unused nil rate band, that is the excess mentioned
40
in subsection (3B) above; and
MUPR is the maximum unauthorised payment rate, that is the
maximum aggregate rate at which tax is chargeable under
Part 4 of the Finance Act 2004 in respect of an unauthorised
member payment.
45

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Schedule 19 — Alternatively secured pensions and transfer lump sum death benefit etc
228

(3D)
The relevant amount is to be reduced by the aggregate of so much of
the sums and the value of the assets of the dependant’s alternatively
secured pension fund as arises, or (directly or indirectly) derives,
from sums or assets forming part of an alternatively secured pension
fund of the member which were designated as available for the
5
payment of—
(a)
dependants’ unsecured pension, or
(b)
dependants’ alternatively secured pension,

to the dependant under the arrangement within the period of six
months beginning with the end of the month in which the member’s
10
death occurred.”
      (5)
In subsection (4), omit “and” at the end of the definition of “dependant” and
insert at the end—
“previously untaxed dependant’s alternatively secured pension
fund amount” means so much of the aggregate mentioned in
15
subsection (3)(a) above as has not given rise to any liability to
tax by virtue of Part 4 of the Finance Act 2004 before tax is
charged on the transfer treated as made by the dependant on
death.”
24
In section 216(6)(ac) (delivery of account)—
20
(a)
after “occurs” insert “, the scheme administrator becomes aware of
the death”, and
(b)
insert at the end “(depending on which occasions the charge)”.
25
In section 226(4) (payment), after “Act” insert “, or under section 151A above
by virtue of subsection (6) of that section,”.
25
26
In section 233(1)(c) (interest on unpaid tax), after “Act” insert “, or under
section 151A above by virtue of subsection (6) of that section,”.
27
In Schedule 2 (provisions applying on reduction of tax), omit paragraph 6A.
Consequential amendment
28    (1)
Section 636A of ITEPA 2003 (exemption for certain lump sums under
30
registered pension schemes) is amended as follows.
      (2)
In subsection (1)—
(a)
insert “or” at the end of paragraph (d), and
(b)
omit paragraph (f) and the word “or” before it.
      (3)
In subsection (7), omit ““transfer lump sum death benefit”,”.
35
Commencement
29    (1)
The amendments made by paragraphs 2(2) and 3 have effect in relation to
deaths of members of registered pension schemes occurring on or after 6th
April 2007.
      (2)
The amendments made by paragraphs 2(3), 4, 14 and 15 have effect for
40
alternatively secured pension years beginning on or after 6th April 2007.
      (3)
The amendments made by paragraphs 5 to 10, 18(2) and (3) and 28 have
effect in relation to lump sum death benefits paid on or after 6th April 2007

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Schedule 20 — Pension schemes etc: miscellaneous
229

in respect of members of schemes whose deaths occur on or after 6th April
2006.
      (4)
The amendments made by paragraphs 11, 12(5) and 16(2), (4) and (6) are
deemed to have come into force on 6th April 2006.
      (5)
The amendments made by paragraphs 12(2) and 13 have effect in relation to
5
members of registered pension schemes becoming entitled to alternatively
secured rights on or after 6th April 2007 in respect of members whose deaths
occur on or after that date.
      (6)
The amendments made by paragraph 16(3) and (5) have effect in relation to
charity lump sum death benefits paid on or after 6th April 2007.
10
      (7)
The amendment made by paragraph 17 is deemed to have come into force
on 6th April 2007.
      (8)
The amendments made by paragraphs 19 to 27 have effect in relation to
deaths, cases where scheme administrators become aware of deaths and
cessations of dependency occurring on or after 6th April 2007.
15
Schedule 20
Section 69

Pension schemes etc: miscellaneous
Introduction
1
Part 4 of FA 2004 (pension schemes etc) is amended as follows.
Persons by whom registered pension schemes may be established
20
2     (1)
Section 154 (persons by whom registered pension scheme may be
established) is amended as follows.
      (2)
For subsection (1) substitute—
“(1)
An application to register a pension scheme may be made only if the
pension scheme—
25
(a)
is an occupational pension scheme, or
(b)
has been established by a person with permission under
FISMA 2000 to establish in the United Kingdom a personal
pension scheme or a stakeholder pension scheme.”
      (3)
After subsection (2) insert—
30
“(2A)
Subsection (1) is to be construed in accordance with section 22 of
FISMA 2000, any relevant order under that section and Schedule 2 to
that Act.”
      (4)
Omit subsection (3).
      (5)
In subsection (4), omit “and section 155”.
35
3
Omit section 155 (persons by whom scheme may be established:
supplementary).
4
In section 273 (members liable as scheme administrator)—

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Schedule 20 — Pension schemes etc: miscellaneous
230

(a)
in subsection (5)(a), omit “was established by a person or body
specified in section 154(1)(a) to (g) (insurance companies etc) and”,
and
(b)
in subsection (7), omit “was established by a person or body specified
in section 154(1)(a) to (g) and”.
5
Unauthorised payments reduced by amount of scheme sanction charge
5
In section 160 (unauthorised payments), after subsection (4) insert—
“(4A)
If an unauthorised member payment or unauthorised employer
payment made to or in respect of a person would have been greater
but for a reduction made in respect of the whole, or any proportion,
10
of the amount which the scheme administrator considers may be the
amount of the liability to the scheme sanction charge in respect of it,
it is to be regarded for the purposes of this Part as increased by the
amount of the reduction.
(4B)
But if the amount, or that proportion of the amount, of that liability
15
is in fact less than the amount of the reduction, a subsequent
payment of an amount not exceeding the difference between that
amount and the amount of the reduction made—
(a)
to or in respect of the same person, and
(b)
before the end of the period of two years beginning with the
20
date on which the unauthorised member payment or
unauthorised employer payment was made,

is not to be regarded for the purposes of this Part as an unauthorised
member payment or unauthorised employer payment.”
Surrenders
25
6     (1)
Section 172A (surrender) is amended as follows.
      (2)
In subsection (5), after paragraph (d) insert—
“(da)
a surrender made as part of a retirement-benefit activities
compliance exercise,
(db)
a surrender of a prospective entitlement to pension death
30
benefits within section 167(1) or lump sum death benefits
within section 168(1) (or both) made in order to comply with
the Employment Equality (Age) Regulations 2006 or
Employment Equality (Age) Regulations (Northern Ireland)
2006 (or any regulations amending or replacing them),”.
35
      (3)
In subsection (10), for “An” substitute “For the purposes of this section an”.
      (4)
After that subsection insert—
“(10A)
For the purposes of this section a surrender relating to an
arrangement under the pension scheme (“the old arrangement”) is
made as part of a retirement-benefit activities compliance exercise
40
if—
(a)
it is made in connection with the making of an arrangement
under another pension scheme relating to the member (“the
new arrangement”),
(b)
the old arrangement and the new arrangement relate to the
45
same employment,