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Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

231

 

(c)   

both the rights surrendered and the rights conferred under

the new arrangement consist of or include a prospective

entitlement to pension death benefits within section 167(1) or

lump sum death benefits within section 168(1) (or both),

(d)   

the surrender and the making of the new arrangement

5

constitute or form part of a transaction the purpose of which

is to secure that the activities of the pension scheme are

limited to retirement-benefit activities within the meaning of

section 255 of the Pensions Act 2004 or Article 232 of the

Pensions (Northern Ireland) Order 2005, and

10

(e)   

the rights surrendered and the rights conferred under the

new arrangement are not significantly different.”

Scheme pensions where ill-health condition met

7     (1)  

Schedule 28 (pension rules) is amended as follows.

      (2)  

In paragraph 2(4) (scheme pensions: cases where cessation or reduction of

15

pension is permitted), for paragraph (a) substitute—

“(a)   

the reduction of the pension if the member became entitled

to it by reason of the ill-health condition being met,”.

      (3)  

In paragraph 2A(2) (certain reductions not permitted if part of avoidance

arrangements), for “the rate of which is reduced in accordance with

20

paragraph (b) of sub-paragraph (4) of paragraph 2 but” substitute “which is

reduced in accordance with paragraph (a) of sub-paragraph (4) of paragraph

2, or the rate of which is reduced in accordance with paragraph (b) of that

sub-paragraph, and”.

Unsecured and dependants’ unsecured pensions: reference periods

25

8     (1)  

Schedule 28 (pension rules) is amended as follows.

      (2)  

In paragraph 10 (reference periods for unsecured pensions), for sub-

paragraph (1) substitute—

    “(1)  

Subject as follows, the period of five unsecured pension years

beginning with the first unsecured pension year, and each

30

succeeding period of five unsecured pension years, is a “reference

period”.

     (1A)  

Sub-paragraph (1B) applies if, at any time during a reference

period (“the current reference period”), the member notifies the

scheme administrator that the member wishes a new reference

35

period to begin on the next day that is an anniversary of the

reference date in relation to the current reference period.

     (1B)  

The scheme administrator may determine—

(a)   

that the current reference period is to end immediately

before that day (so that sub-paragraph (1) no longer

40

applies), and

(b)   

that (subject to any further operation of this sub-

paragraph) the period of five unsecured pension years

beginning with that day, and each succeeding period of

five unsecured pension years, is to be a reference period.

45

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

232

 

     (1C)  

The first day of each reference period is, in relation to that period,

“the reference date”.”

      (3)  

In paragraph 24 (reference periods for dependants’ unsecured pensions), for

sub-paragraph (1) substitute—

    “(1)  

Subject as follows, the period of five unsecured pension years

5

beginning with the first unsecured pension year, and each

succeeding period of five unsecured pension years, is a “reference

period”.

     (1A)  

Sub-paragraph (1B) applies if, at any time during a reference

period (“the current reference period”), the dependant notifies the

10

scheme administrator that the dependant wishes a new reference

period to begin on the next day that is an anniversary of the

reference date in relation to the current reference period.

     (1B)  

The scheme administrator may determine—

(a)   

that the current reference period is to end immediately

15

before that day (so that sub-paragraph (1) no longer

applies), and

(b)   

that (subject to any further operation of this sub-

paragraph) the period of five unsecured pension years

beginning with that day, and each succeeding period of

20

five unsecured pension years, is to be a reference period.

     (1C)  

The first day of each reference period is, in relation to that period,

“the reference date”.”

Pension commencement lump sums

9          

In paragraph 1(1) of Schedule 29 (pension commencement lump sums)—

25

(a)   

in paragraph (a), after “to it” insert “before reaching the age of 75”,

(b)   

in paragraph (c), for “three months” substitute “one year”, and

(c)   

omit paragraph (e) (but not including the “and” at the end).

Winding-up lump sums

10    (1)  

Paragraph 10 of Schedule 29 (winding-up lump sums) is amended as

30

follows.

      (2)  

In sub-paragraph (1)(c), for “the member’s employer” substitute “any

person by whom the member is employed at the time when the lump sum is

paid, and who has made contributions under the pension scheme in respect

of the member within the period of five years ending with the day on which

35

it is paid,”.

      (3)  

In sub-paragraph (3)—

(a)   

for “are that the employer” substitute “referred to in paragraph (c) of

sub-paragraph (1) are that the person mentioned in that paragraph”,

and

40

(b)   

omit paragraph (a).

Lump sum death benefits

11    (1)  

Schedule 29 (authorised lump sums) is amended as follows.

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

233

 

      (2)  

In paragraph 13(c) (defined benefits lump sum death benefit), for “day on

which the member died,” substitute “earlier of the day on which the scheme

administrator first knew of the member’s death and the day on which the

scheme administrator could first reasonably be expected to have known of

it,”.

5

      (3)  

In paragraph 15(1)(c) (uncrystallised funds lump sum death benefit), for

“day on which the member died,” substitute “earlier of the day on which the

scheme administrator first knew of the member’s death and the day on

which the scheme administrator could first reasonably be expected to have

known of it,”.

10

Taxable property held by investment-regulated pension schemes: indirect holdings in REITs

12    (1)  

Schedule 29A (taxable property held by investment-regulated pension

schemes) is amended as follows.

      (2)  

In paragraph 20(1)(b) (indirect holdings: introduction to exception for

REITs), for “paragraph 22 makes” substitute “paragraphs 22, 24 and 25

15

make”.

      (3)  

In paragraph 22 (REITs)—

(a)   

in sub-paragraph (1), after paragraph (b) insert—

         

“and paragraph 24 applies to the pension scheme’s interest

in the vehicle.”, and

20

(b)   

omit sub-paragraph (2).

      (4)  

In paragraph 24(1) (conditions applying for paragraph 23), for “paragraph

23” substitute “paragraphs 22 and 23”.

      (5)  

In paragraph 25(2) (provisions supplementing paragraph 24), for “23(1)”

substitute “22 or 23”.

25

Transitional provision: primary protection

13         

In paragraph 11D of Schedule 36 (lump sum death benefits to be taken into

account as part of individual’s pre-commencement rights only if paid under

policy not significantly varied since 5th April 2006), after sub-paragraph (2)

insert—

30

   “(2A)  

A variation of the terms of a policy of life insurance 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) is to be

ignored for the purposes of sub-paragraph (2).

35

     (2B)  

Where a policy of life insurance held on 5th April 2006 for the

purposes of an occupational pension scheme is surrendered and a

new one is taken out—

(a)   

as part of a retirement-benefit activities compliance

exercise, or

40

(b)   

to comply with the Employment Equality (Age)

Regulations 2006 or Employment Equality (Age)

Regulations (Northern Ireland) 2006 (or any regulations

amending or replacing them),

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

234

 

           

the new policy is to be treated for the purposes of sub-paragraph

(2) as if it were the same as the old.

     (2C)  

For this purpose a policy of life insurance is surrendered and a

new one is taken out as part of a retirement-benefit activities

compliance exercise if—

5

(a)   

the surrender of the old policy and taking out of the new

policy constitute or form part of a transaction the purpose

of which is to secure that the activities of the pension

scheme are limited to retirement-benefit activities within

the meaning of section 255 of the Pensions Act 2004 or

10

Article 232 of the Pensions (Northern Ireland) Order 2005,

and

(b)   

the rights under the old policy and the new policy are not

significantly different.”

Transitional provision: enhanced protection

15

14         

Schedule 36 (transitional provision) is amended as follows.

15    (1)  

Paragraph 12 (when enhanced protection ceases) is amended as follows.

      (2)  

In paragraph (c) of sub-paragraph (2), for “solely for the purposes of a

permitted transfer” substitute “in permitted circumstances”.

      (3)  

After that sub-paragraph insert—

20

   “(2A)  

An arrangement is made in permitted circumstances if it is

made—

(a)   

for the purposes of a permitted transfer,

(b)   

as part of a retirement-benefit activities compliance

exercise, or

25

(c)   

as part of an age-equality compliance exercise.

     (2B)  

For the purposes of sub-paragraph (2A)(b) an arrangement (“the

new arrangement”) relating to an individual is made as part of a

retirement-benefit activities compliance exercise if—

(a)   

it is made in connection with the cancellation of rights

30

under another arrangement relating to the individual (“the

old arrangement”),

(b)   

the old arrangement and the new arrangement relate to the

same employment,

(c)   

there is a prospective entitlement to pension death benefits

35

within section 167(1) or lump sum death benefits within

section 168(1) (or both) under both the old arrangement

and the new arrangement,

(d)   

the making of the new arrangement and the cancellation of

the old arrangement constitute or form part of a

40

transaction the purpose of which is to secure that the

activities of the pension scheme under which the

arrangement is made are limited to retirement-benefit

activities within the meaning of section 255 of the Pensions

Act 2004 or Article 232 of the Pensions (Northern Ireland)

45

Order 2005, and

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

235

 

(e)   

the rights cancelled under the old arrangement and the

rights conferred under the new arrangement are not

significantly different.

     (2C)  

For the purposes of sub-paragraph (2A)(c) an arrangement (“the

new arrangement”) is made as part of an age-equality compliance

5

exercise if—

(a)   

it is made in connection with the cancellation of rights

under another arrangement relating to the individual (“the

old arrangement”),

(b)   

the old arrangement and the new arrangement relate to the

10

same employment,

(c)   

there is a prospective entitlement to pension death benefits

within section 167(1) or lump sum death benefits within

section 168(1) (or both) under both the old arrangement

and the new arrangement, and

15

(d)   

the new arrangement is made, and the old arrangement

cancelled, 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).”

20

      (4)  

In sub-paragraph (7)—

(a)   

omit paragraph (a),

(b)   

in paragraph (b), omit “held for the purposes of, or representing

accrued rights under, the arrangement”, and

(c)   

in paragraph (c), for “those” (in both places) substitute “the”.

25

      (5)  

In paragraph (a) of sub-paragraph (8), omit—

(a)   

“, or two or more money purchase arrangements that are not cash

balance arrangements,”, and

(b)   

“or” at the end.

      (6)  

After paragraph (b) of that sub-paragraph insert—

30

“(c)   

where the arrangement is a cash balance arrangement or a

defined benefits arrangement relating to a present or

former employment, they are transferred in connection

with a relevant business transfer so as to become held for

the purposes of, or to represent rights under, a cash

35

balance arrangement or defined benefits arrangement

made under a registered pension scheme or recognised

overseas pension scheme, or

(d)   

where the arrangement (“the old arrangement”) is a cash

balance arrangement or a defined benefits arrangement,

40

they are transferred as part of a retirement-benefit

activities compliance exercise so as to become held for the

purposes of, or to represent rights under, a cash balance

arrangement or defined benefits arrangement (“the new

arrangement”) relating to the same employment as the old

45

arrangement and made under a registered pension scheme

or recognised overseas pension scheme.”

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

236

 

      (7)  

After that sub-paragraph insert—

   “(8A)  

For the purposes of sub-paragraph (8)(c) “relevant business

transfer” means a transfer of an undertaking or a business (or part

of an undertaking or a business) from one person to another—

(a)   

which involves the transfer of at least 20 employees, and

5

(b)   

in the case of which, if the transferor and the transferee are

bodies corporate, they would not be treated as members of

the same group for the purposes of Chapter 4 of Part 10 of

ICTA.

     (8B)  

For the purposes of sub-paragraph (8)(d) sums or assets held for

10

the purposes of, or representing accrued rights under, the old

arrangement are transferred as part of a retirement-benefit

activities compliance exercise if—

(a)   

there is a prospective entitlement to pension death benefits

within section 167(1) or lump sum death benefits within

15

section 168(1) (or both) under both the old arrangement

and the new arrangement, and

(b)   

the transfer constitutes or forms part of a transaction the

purpose of which is to secure that the activities of the

pension scheme under which the old arrangement was

20

made are limited to retirement-benefit activities within the

meaning of section 255 of the Pensions Act 2004 or Article

232 of the Pensions (Northern Ireland) Order 2005.”

      (8)  

In sub-paragraph (9)—

(a)   

in paragraph (a), omit “, or each of the arrangements,” and “and” at

25

the end,

(b)   

in paragraph (b), after “(8)(b)” insert “or (d)” and after “15” insert “to

17”, and

(c)   

after that paragraph insert “and

(c)   

if the transfer is a permitted transfer by virtue of

30

sub-paragraph (8)(c), this paragraph (and

paragraphs 13, 15 to 17 and 17A(3)) apply as if the

arrangement to which the transfer is made were the

same as that from which it is made and (if the

employment is transferred) as if the employment

35

with the transferee were the employment with the

transferor.”

      (9)  

After that sub-paragraph insert—

   “(10)  

The Treasury may by order amend sub-paragraph (8) (and make

other amendments consequential on any amendment of that sub-

40

paragraph).”

16         

In paragraph 14 (relevant contributions), after sub-paragraph (3) insert—

   “(3A)  

A variation of the terms of a policy made in order to comply with

the Employment Equality (Age) Regulations 2006 or Employment

Equality (Age) Regulations (Northern Ireland) 2006 (or any

45

regulations amending or replacing them) is to be ignored for the

purposes of sub-paragraph (3).

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

237

 

     (3B)  

Where a policy of insurance on the life of the individual issued, or

issued in respect of insurances made, before 6th April 2006 is

surrendered and a new one is taken out—

(a)   

as part of a retirement-benefit activities compliance

exercise, or

5

(b)   

as part of an age-equality compliance exercise.

           

the new policy is to be treated for the purposes of sub-paragraph

(3) as if it were the same as the old.

     (3C)  

For the purposes of sub-paragraph (3B)(a) a policy is surrendered,

and a new policy of life insurance is taken out, as part of a

10

retirement-benefit activities compliance exercise if—

(a)   

the surrender of the old policy and the taking out of the

new policy constitute or form part of a transaction the

purpose of which is to secure that the activities of the

pension scheme under which the arrangement is made are

15

limited to retirement-benefit activities within the meaning

of section 255 of the Pensions Act 2004 or Article 232 of the

Pensions (Northern Ireland) Order 2005, and

(b)   

the rights under the old policy and the new policy are not

significantly different.

20

     (3D)  

For the purposes of sub-paragraph (3B)(b) a policy is surrendered,

and a new policy of life insurance is taken out, as part of an age-

equality compliance exercise if—

(a)   

the old policy is surrendered, and the new policy is taken

out, in order to comply with the Employment Equality

25

(Age) Regulations 2006 or Employment Equality (Age)

Regulations (Northern Ireland) 2006 (or any regulations

amending or replacing them), and

(b)   

any significant difference between the rights under the old

policy and the rights under the new policy is attributable

30

to the need to comply with those Regulations (or any

regulations amending or replacing them).”

17    (1)  

Paragraph 15 (relevant benefit accrual) is amended as follows.

      (2)  

In sub-paragraph (2), after “arrangement” (in both places) insert “which are

transferred”.

35

      (3)  

In sub-paragraph (7), for “15 and 16” substitute “16 and 17”.

Inheritance tax: lump sum death benefits

18         

In section 58 of IHTA 1984 (settlements: “relevant property”), after

subsection (2) insert—

“(2A)   

For the purposes of subsection (1)(d) above—

40

(a)   

property applied to pay lump sum death benefits within

section 168(1) of the Finance Act 2004 in respect of a member

of a registered pension scheme is to be taken to be held for the

purposes of the scheme from the time of the member’s death

until the payment is made, and

45

(b)   

property applied to pay lump sum death benefits in respect

of a member of a section 615(3) scheme is to be taken to be so

held if the benefits are paid within the period of two years

 

 

 
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