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

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      (6)  

“The relevant time”—

(a)   

in the case of a policy of insurance within sub-paragraph (3), is 20th

March 2007, and

(b)   

in the case of a policy of insurance within sub-paragraph (4), is the

time when it became a protected policy.

5

      (7)  

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

Employment Equality (Age) Regulations 2006 (S.I. 2006/1031) or

Employment Equality (Age) Regulations (Northern Ireland) 2006 (S.R.

2006/261) (or any regulations amending or replacing them) is to be ignored

for the purposes of sub-paragraph (5).

10

Power to amend commencement provisions

8     (1)  

The Commissioners for Her Majesty’s Revenue and Customs may by

regulations amend paragraphs 4 to 7.

      (2)  

Regulations under sub-paragraph (1) having the effect of limiting the

contributions which are life assurance premium contributions may be made

15

so as to have effect in relation to times before they are made.

Schedule 19

Section 68

 

Alternatively secured pensions and transfer lump sum death benefit etc

Introduction

1          

Part 4 of FA 2004 (pension schemes etc) is amended as follows.

20

Alternatively secured pension: guaranteed pension and maximum

2     (1)  

In section 165(1) (pension rules) is amended as follows.

      (2)  

In pension rule 2 (guaranteed pensions)—

(a)   

for “, an annuity or alternatively secured pension” substitute “or an

annuity”, and

25

(b)   

for “, annuity or alternatively secured pension” substitute “or

annuity”.

      (3)  

In pension rule 7 (maximum alternatively secured pension), for “70%”

substitute “90%”.

3          

In paragraph 12 of Schedule 28 (pension rules: alternatively secured pension

30

year), omit sub-paragraphs (3) and (4) (guaranteed pensions).

Maximum dependants’ alternatively secured pension

4          

In section 167(1) (pension death benefit rules), in pension death benefit rule

6 (maximum dependants’ alternatively secured pension), for “70%”

substitute “90%”.

35

 

 

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

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Abolition of transfer lump sum death benefit

5          

In section 168(1) (lump sum death benefit rule), omit paragraph (g) (transfer

lump sum death benefit).

6          

Omit section 172B(5)(a) (reduction for transfer lump sum death benefit).

7          

In section 188(5) (amounts not to be treated as contributions), omit

5

paragraph (b) and the word “and” before it.

8          

In section 280(2) (index), omit the entry relating to transfer lump sum death

benefit.

9          

In Schedule 29, omit paragraph 19 (transfer lump sum death benefit).

10         

In paragraph 17A of Schedule 36 (“enhanced protection”)—

10

(a)   

in sub-paragraph (1), insert “or” after paragraph (a) and omit

paragraph (c) and the word “or” before it, and

(b)   

in sub-paragraph (2), omit “, or to a transfer lump sum death benefit

being paid,”.

Untraceable members

15

11         

In paragraph 11 of Schedule 28 (member’s alternatively secured pension

fund), insert at the end—

    “(6)  

Sub-paragraph (7) applies if—

(a)   

at the time when the member reaches the age of 75, the

scheme administrator has been unable to ascertain the

20

member’s whereabouts after having taken all reasonable

steps to do so, and

(b)   

paragraph 8(2) applies in relation to the member and the

arrangement and none of the sums or assets held for the

purposes of the arrangement are member-designated

25

funds immediately before it applies.

      (7)  

In that case the references in sub-paragraphs (2) and (3) to the time

when the member reached the age of 75 are to be read as referring

to the end of the period of six months beginning with any later

date on which the member’s whereabouts are subsequently

30

ascertained by the scheme administrator.”

Increase in rights on death

12    (1)  

Section 172B (increase in rights of connected person on death) is amended as

follows.

      (2)  

In subsection (2)(b), for “, alternatively secured pension fund, dependant’s

35

unsecured pension fund or dependant’s alternatively secured” substitute

“or dependant’s unsecured”.

      (3)  

In subsection (4), for “(6)” substitute “(5)”.

      (4)  

In subsection (7)(a), after “there” insert “are”.

 

 

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

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      (5)  

After subsection (8) insert—

“(8A)   

Nothing in this section applies in relation to the rights representing

the member’s unsecured pension fund if those rights would

represent the member’s alternatively secured pension fund but for

paragraph 11(6) and (7) of Schedule 28.”

5

13         

After that section insert—

“172BA  

 Increase in rights on death arising from alternatively secured

pension fund etc

(1)   

This section applies if, at any time (“the relevant time”) after the

death of a member of a registered pension scheme, another member

10

of the pension scheme becomes entitled to alternatively secured

rights.

(2)   

“Alternatively secured rights” are rights representing the whole or

part of the dead member’s alternatively secured pension fund, or

dependant’s alternatively secured pension fund, in respect of an

15

arrangement under the pension scheme.

(3)   

The pension scheme is to be treated as making an unauthorised

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

representatives).

(4)   

Subject to subsection (5), the amount of the unauthorised payment is

20

the amount by which—

(a)   

the consideration which might be expected to be received in

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

which the other member is actually or prospectively entitled

under the pension scheme immediately after the relevant

25

time, exceeds

(b)   

the consideration which might be expected to be received in

respect of such an assignment (or assignation) immediately

before the relevant time.

(5)   

But that amount is to be reduced by so much (if any) of the excess as

30

arises from the other member becoming entitled to pension death

benefits or lump sum death benefits in respect of the dead member.

(6)   

This section does not apply if the other member’s entitlement to the

alternatively secured rights is brought about by an assignment (or

agreement to assign) within section 172.

35

(7)   

Rights representing the member’s unsecured pension fund are

alternatively secured rights for the purposes of this section if they

would be rights representing the member’s alternatively secured

pension fund but for paragraph 11(6) and (7) of Schedule 28.”

 

 

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

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Minimum alternatively secured pension and dependants’ alternatively secured pension

14         

After section 181 insert—

“Alternatively secured pensions

“181A   

  Minimum level of payment

(1)   

The total amount of alternatively secured pension paid to a member

5

of a registered pension scheme in each alternatively secured pension

year in respect of a money purchase arrangement under the pension

scheme must be at least 55% of the basis amount for the alternatively

secured pension year (but subject to subsection (5)).

(2)   

The total amount of dependants’ alternatively secured pension paid

10

to a dependant of a member of a registered pension scheme in each

alternatively secured pension year in respect of a money purchase

arrangement under the pension scheme must be at least 55% of the

basis amount for the alternatively secured pension year (but subject

to subsection (5)).

15

(3)   

If subsection (1) or (2) is not complied with in an alternatively

secured pension year in the case of any arrangement under a

registered pension scheme, the pension scheme is to be treated as

having made a scheme chargeable payment when the alternatively

secured pension year ends.

20

(4)   

The amount of the scheme chargeable payment is the difference

between—

(a)   

the total amount of alternatively secured pension paid to the

member, or of the dependants’ alternatively secured pension

paid to the dependant, in respect of the arrangement in the

25

alternatively secured pension year, and

(b)   

55% of the basis amount for the alternatively secured pension

year,

   

(or, if nothing is so paid, 55% of the basis amount for the alternatively

secured pension year).

30

(5)   

Subsection (1) or (2) does not apply in relation to an alternatively

secured pension year if—

(a)   

it is the alternatively secured pension year ending

immediately before the death of the member or dependant,

or

35

(b)   

in the alternatively secured pension year the member’s

alternatively secured pension fund, or the dependant’s

alternatively secured pension fund, in respect of the

arrangement is applied on pension or annuity provision (see

subsection (6)).

40

(6)   

The member’s alternatively secured pension fund, or the

dependant’s alternatively secured pension fund, in respect of the

arrangement is applied on pension or annuity provision if all of the

sums and assets representing it are applied in one or more of the

following ways—

45

(a)   

towards the provision of a scheme pension or dependants’

scheme pension;

 

 

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

227

 

(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.

 

 

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

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      (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—equation: over[cross[times[char[U],char[N],char[R],char[B]],num[100.0000000000000000,"100"]],

plus[num[100.0000000000000000,"100"],minus[times[char[M],char[U],char[P],char[R]]]]]

   

where—

 

 

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

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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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