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

230

 

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—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—

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

 

 

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

231

 

(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.”

      (5)  

In subsection (4), omit “and” at the end of the definition of “dependant” and

10

insert at the end—

““previously untaxed dependant’s alternatively secured

pension fund amount” means so much of the aggregate

mentioned in subsection (3)(a) above as has not given rise to

any liability to tax by virtue of Part 4 of the Finance Act 2004

15

before tax is charged on the transfer treated as made by the

dependant on death.”

24         

In section 216(6)(ac) (delivery of account)—

(a)   

after “occurs” insert “, the scheme administrator becomes aware of

the death”, and

20

(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,”.

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,”.

25

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

registered pension schemes) is amended as follows.

      (2)  

In subsection (1)—

30

(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”,”.

Commencement

29    (1)  

The amendments made by paragraphs 2(2) and 3 have effect in relation to

35

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

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

40

effect in relation to lump sum death benefits paid in respect of members of

schemes whose deaths occur on or after 6th April 2007.

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

232

 

      (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

members of registered pension schemes becoming entitled to alternatively

secured rights on or after 6th April 2007 in respect of members whose deaths

5

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.

      (7)  

The amendment made by paragraph 17 is deemed to have come into force

on 6th April 2007.

10

      (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.

Schedule 20

Section 69

 

Pension schemes etc: miscellaneous

15

Introduction

1          

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

Persons by whom registered pension schemes may be established

2     (1)  

Section 154 (persons by whom registered pension scheme may be

established) is amended as follows.

20

      (2)  

For subsection (1) substitute—

“(1)   

An application to register a pension scheme may be made only if the

pension scheme—

(a)   

is an occupational pension scheme, or

(b)   

has been established by a person with permission under

25

FISMA 2000 to establish in the United Kingdom a personal

pension scheme or a stakeholder pension scheme.”

      (3)  

After subsection (2) insert—

“(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

30

that Act.”

      (4)  

Omit subsection (3).

      (5)  

In subsection (4), omit “and section 155”.

3          

Omit section 155 (persons by whom scheme may be established:

supplementary).

35

4          

In section 273 (members liable as scheme administrator)—

(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

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

233

 

(b)   

in subsection (7), omit “was established by a person or body specified

in section 154(1)(a) to (g) and”.

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

5

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,

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

10

amount of the reduction.

(4B)   

But if the amount, or that proportion of the amount, of that liability

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—

15

(a)   

to or in respect of the same person, and

(b)   

before the end of the period of two years beginning with the

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

20

member payment or unauthorised employer payment.”

Surrenders

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

25

compliance exercise,

(db)   

a surrender of a prospective entitlement to pension death

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

30

Employment Equality (Age) Regulations (Northern Ireland)

2006 (or any regulations amending or replacing them),”.

      (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

35

arrangement under the pension scheme (“the old arrangement”) is

made as part of a retirement-benefit activities compliance exercise

if—

(a)   

it is made in connection with the making of an arrangement

under another pension scheme relating to the member (“the

40

new arrangement”),

(b)   

the old arrangement and the new arrangement relate to the

same employment,

(c)   

both the rights surrendered and the rights conferred under

the new arrangement consist of or include a prospective

45

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

234

 

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

constitute or form part of a transaction the purpose of which

is to secure that the activities of the pension scheme are

5

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

(e)   

the rights surrendered and the rights conferred under the

new arrangement are not significantly different.”

10

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

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

“(a)   

the reduction of the pension if the member became entitled

15

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

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

20

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

8     (1)  

Schedule 28 (pension rules) is amended as follows.

      (2)  

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

25

paragraph (1) substitute—

    “(1)  

Subject as follows, the period of five unsecured pension years

beginning with the first unsecured pension year, and each

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

period”.

30

     (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

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

reference date in relation to the current reference period.

35

     (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

applies), and

(b)   

that (subject to any further operation of this sub-

40

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.

     (1C)  

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

“the reference date”.”

45

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

235

 

      (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

beginning with the first unsecured pension year, and each

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

5

period”.

     (1A)  

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

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

scheme administrator that the dependant wishes a new reference

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

10

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

applies), and

15

(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.

     (1C)  

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

20

“the reference date”.”

Pension commencement lump sums

9          

In section 166(2)(a) (when person becomes entitled to pension

commencement lump sum), after “paid” insert “(or, if the person dies before

becoming entitled to the pension in connection with which it was

25

anticipated it would be paid, immediately before death)”.

10         

In section 219(7) (multiple benefit crystallisation events occuring by reason

of payment of lump sum death benefits treated as occurring immediately

before death), insert at the end “but immediately after any benefit

crystallisation event occurring immediately before the individual’s death by

30

virtue of section 166(2).”

11    (1)  

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

      (2)  

In paragraph 1(1) (conditions to be met if lump sum is to be pension

commencement lump sum)—

(a)   

for paragraph (a) substitute—

35

“(a)   

the member becomes entitled to it before reaching

the age of 75,

(aa)   

the member becomes entitled to it in connection

with becoming entitled to a relevant pension (or

dies after becoming entitled to it but before

40

becoming entitled to the relevant pension in

connection with which it was anticipated that the

member would become entitled to it)”,

(b)   

in paragraph (c), for “of three months beginning with” substitute

“beginning six months before, and ending one year after,”, and

45

(c)   

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

 

 

Finance Bill
Schedule 20 — Pension schemes etc: miscellaneous

236

 

      (3)  

In paragraph 2 (“permitted maximum”), after sub-paragraph (5) insert—

   “(5A)  

But if the member dies before becoming entitled to the relevant

pension in connection with which it was anticipated that the

member would become entitled to the lump sum, the permitted

maximum is the available portion of the member’s lump sum

5

allowance.”

Winding-up lump sums

12    (1)  

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

follows.

      (2)  

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

10

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

it is paid,”.

      (3)  

In sub-paragraph (3)—

15

(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

(b)   

omit paragraph (a).

Lump sum death benefits

20

13    (1)  

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

      (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

25

it,”.

      (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

30

known of it,”.

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

14    (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

35

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

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

40

in the vehicle.”, and

(b)   

omit sub-paragraph (2).

 

 

 
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