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Finance Bill (Volume II)
Schedule 28 — Inheritance of tax-relieved pension savings

353

 

      (2)  

In subsection (3B)—

(a)   

for the words from “that” to “per cent.” substitute “amount that

could be transferred by a chargeable transfer made (under section 4

above) on the dependant’s death if it were to be wholly chargeable at

the rate of nil per cent. (assuming, if necessary, that the value of the

dependant’s estate were sufficient but otherwise having regard to

the circumstances of the dependant)”, and

(b)   

for “that chargeable transfer” substitute “the chargeable transfer so

made”.

      (3)  

In subsection (4), insert at the appropriate place—

““dependants’ alternatively secured pension” has the meaning

given by paragraph 19 of that Schedule;” and

““dependants’ unsecured pension” has the meaning given by

paragraph 18 of that Schedule;”,

           

and in the definition of “dependant’s alternatively secured pension fund”,

for “Schedule 28 to that Act” substitute “that Schedule”.

10         

After section 151C insert—

“151D   

 Unauthorised payment where person dies over 75 with pension or

annuity

(1)   

This section applies where—

(a)   

a member of a registered pension scheme, or a dependant of

such a member, dies after reaching the age of 75;

(b)   

immediately before death the member or dependant has

under the pension scheme an actual right to payments under

a relevant pension or relevant annuity or a prospective right

to payments under a relevant pension; and

(c)   

at any time after the death a relevant unauthorised payment

is made by the pension scheme.

(2)   

Where this section applies tax shall be charged under this section.

(3)   

The amount on which tax is charged under this section shall be the

difference between—

(a)   

the amount of the relevant unauthorised payment; and

(b)   

the amount of any liability to income tax which has arisen

under Part 4 of the Finance Act 2004 by virtue of the making

of the relevant unauthorised payment.

(4)   

In this section—

“dependant” has the meaning given by paragraph 15 of

Schedule 28 to the Finance Act 2004;

“dependants’ annuity” has the same meaning as in that Part of

that Act (see paragraph 17 of that Schedule);

“dependants’ scheme pension” has the same meaning as in that

Part of that Act (see paragraph 16 of that Schedule);

“lifetime annuity” has the same meaning as in that Part of that

Act (see paragraph 3 of that Schedule);

“relevant annuity” means a lifetime annuity or dependants’

annuity purchased by the application of sums or assets held

for the purposes of the pension scheme;

 
 

Finance Bill (Volume II)
Schedule 28 — Inheritance of tax-relieved pension savings

354

 

“relevant pension” means a scheme pension or dependants’

scheme pension provided by the scheme administrator or as

a result of the application of sums or assets held for the

purposes of the pension scheme;

“relevant unauthorised payment” means an unauthorised

payment (within the meaning of Part 4 of the Finance Act

2004: see section 160(5) of that Act) which—

(a)   

consists of the payment of a lump sum in respect of

the dead member or dependant; or

(b)   

is treated as made by virtue of the operation of section

172B of that Act by reason of the death; and

“scheme pension” has the same meaning as in Part 4 of that Act

(see paragraph 2 of Schedule 28 to that Act).

151E    

Rate or rates of charge under section 151D

(1)   

Tax charged under section 151D above shall be charged at the rate or

rates at which it would be charged if the amount on which it is

charged, and any amount on which tax was previously charged

under that section in relation to the death of the member or

dependant, were part of the value transferred by the transfer of value

made on the death of the member or dependant.

(2)   

The rate or rates at which tax is charged on that amount shall be

determined as if that amount had formed the highest part of that

value.

(3)   

Subsection (4) below applies where, before the time when the

unauthorised payment is made, there have been one or more

reductions of tax by virtue of the coming into force of a substitution

of a new Table in Schedule 1 to this Act since the death of the member

or dependant.

(4)   

The rate or rates at which tax is charged under section 151D above is

to be determined as if the new Table effecting the reduction of tax (or

the most recent reduction of tax) (“the applicable Table”) had been in

force at the time of the death of the member or dependant, but subject

to subsections (5) and (8) below.

(5)   

The nil-rate band maximum in the applicable Table is to be treated

for the purposes of this section as reduced by the used-up percentage

of the difference between—

(a)   

that nil-rate band maximum, and

(b)   

the nil-rate band maximum which was actually in force at the

time of the death of the member or dependant.

(6)   

For the purposes of subsection (5) above “the used-up percentage”

is—equation: plus[num[100.0000000000000000,"100"],minus[id[cross[over[char[E],times[char[N],char[

R],char[B],char[M]]],num[100.0000000000000000,"100"]]]]]

   

where—

E is the amount by which M is greater than VT under section

8A(2) above in the case of the member or dependant; and

NRBM is the nil-rate band maximum at the time of the death of

the member or dependant.

 
 

Finance Bill (Volume II)
Schedule 28 — Inheritance of tax-relieved pension savings

355

 

(7)   

The following provisions apply where—

(a)   

tax is charged under section 151D above, and

(b)   

immediately before the death of the member or dependant,

the member or dependant had a spouse or civil partner (“the

survivor”).

(8)   

If the survivor died before the time when the unauthorised payment

is made, tax is charged as if the personal nil-rate band maximum of

the member or dependant were appropriately reduced.

(9)   

In subsection (8) above—

“the personal nil-rate band maximum of the member or

dependant” is the nil rate band maximum in the applicable

Table, increased in accordance with section 8A above where

that section effected an increase in that nil-rate band

maximum in the case of the member or dependant (as a

survivor of another deceased person), and

“appropriately reduced” means reduced by the amount (if any)

by which the amount on which tax was charged at the rate of

nil per cent. on the death of the survivor was increased by

reason of the operation of section 8A above by virtue of the

position of the member or dependant.

(10)   

If the survivor did not die before the time when the unauthorised

payment is made, tax is to be charged on the death of the survivor as

if the percentage referred to in section 8A(3) above in the case of the

member or dependant were that specified in subsection (11) below.

(11)   

That percentage is—equation: cross[over[times[char[A],char[E]],times[char[A],char[N],char[R],char[B],char[M]]],

num[100.0000000000000000,"100"]]

   

where—

AE is the adjusted excess, that is the amount by which M would

be greater than VT under section 8A(2) above in the case of

the member or dependant if—

(a)   

the amount on which tax is charged under section

151D above were included in the value transferred by

the chargeable value made on the death of the

member or dependant, and

(b)   

the nil-rate band maximum at the time of the death

were ANRBM; and

ANRBM is the adjusted nil-rate band maximum, that is the nil-

rate band maximum in the applicable Table (as reduced

under subsection (5) above where that subsection applies).”

11         

In section 210 (persons liable), after subsection (2) insert—

“(3)   

The person liable for tax chargeable under section 151D—

(a)   

if the tax is charged by reason of an unauthorised payment

actually made by any person other than the scheme

administrator of the pension scheme, that person, and

(b)   

otherwise, the scheme administrator of the pension scheme.”

12    (1)  

Section 216 (delivery of accounts) is amended as follows.

 
 

Finance Bill (Volume II)
Schedule 29 — Further provision about pension schemes

356

 

      (2)  

In subsection (1)(bca), after “210(2)” insert “or (3)”.

      (3)  

In subsection (6)(ac), after “scheme” insert “otherwise than by reason of a

liability to tax under section 210(3)”.

      (4)  

In subsection (7), for “or 126” substitute “, 126 or 151D”.

13         

In section 226(4) (payment), for “or 151B” substitute “, 151B or 151D”.

14         

In section 233(1)(c) (interest on unpaid tax), for “or 151B” substitute “, 151B

or 151D”.

Commencement

15    (1)  

The amendments made by paragraph 2 have effect in relation to

assignments or agreements to assign made on or after 10 October 2007.

      (2)  

The amendments made by paragraph 3 have effect in relation to surrenders

and agreements to surrender made on or after that date.

      (3)  

The amendments made by paragraphs 4, 7(2), 8, 10 and 11 to 14 have effect

in relation to deaths occurring on or after 6 April 2008.

Schedule 29

Section 90

 

Further provision about pension schemes

Authorised member payments

1     (1)  

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

      (2)  

In section 164 (authorised member payments)—

(a)   

the existing provision becomes subsection (1), and

(b)   

after that subsection insert—

“(2)   

Regulations under subsection (1)(f) may—

(a)   

provide that for the purposes of Part 9 of ITEPA 2003

all or part of a prescribed payment is to be treated as

pension under a registered pension scheme, or as a

lump sum of a prescribed description,

(b)   

provide that all or part of a prescribed payment is

subject to the short service refund lump sum charge

or the special lump sum death benefits charge,

(c)   

provide that a prescribed event in relation to a

prescribed payment is to be treated for the purposes

of the lifetime allowance charge as a benefit

crystallisation event, and make provision as to the

amount crystallised by that event,

(d)   

include provision having effect in relation to times

before the regulations are made if that provision does

not increase any person’s liability to tax,

   

and “prescribed” means prescribed in regulations under

subsection (1)(f).”

 
 

Finance Bill (Volume II)
Schedule 29 — Further provision about pension schemes

357

 

      (3)  

In the table in section 216 (benefit crystallisation events and amounts

crystallised), insert at the end—

 

“9. If regulations under section

An amount determined in

 
 

164(1)(f) so provide, the happening

accordance with the regulations”

 
 

of an event prescribed in the

  
 

regulations in relation to a payment

  
 

prescribed in the regulations

  

Transfer of lifetime annuities and dependants’ annuities

2     (1)  

Schedule 28 to FA 2004 (authorised pensions etc) is amended as follows.

      (2)  

In paragraph 3 (lifetime annuities), after sub-paragraph (2C) insert—

  “(2CA)  

The regulations may include provision having effect in relation to

times before they are made if that provision does not increase any

person’s liability to tax.”

      (3)  

In paragraph 17 (dependants’ annuities), after sub-paragraph (4) insert—

   “(4A)  

The regulations may include provision having effect in relation to

times before they are made if that provision does not increase any

person’s liability to tax.”

Definition of investment-regulated pension schemes

3     (1)  

In Schedule 29A to FA 2004 (taxable property etc), omit paragraph 2(1)(b)

and the “or” before it.

      (2)  

The amendment made by sub-paragraph (1) is treated as having come into

force on 6 April 2006.

Benefit crystallisation event 3

4          

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

5          

In the table in section 216(1) (benefit crystallisation events), in benefit

crystallisation event 3 (becoming entitled to pension at increased annual

rate), in column 1 after “rate which” insert “—

(a)   

exceeds the threshold annual rate, and

(b)   

”.

6          

Schedule 32 (benefit crystallisation events: supplementary) is amended as

follows.

7     (1)  

Paragraph 10 (benefit crystallisation event 3: excepted circumstances) is

amended as follows.

      (2)  

The existing provision becomes sub-paragraph (1).

      (3)  

For paragraph (b) of that sub-paragraph substitute—

“(b)   

that the individual is one of a class of at least 20 pensioner

members of the pension scheme, and all the scheme

pensions being paid under the pension scheme to

 
 

Finance Bill (Volume II)
Schedule 29 — Further provision about pension schemes

358

 

pensioner members of that class are at that time increased

at the same rate.”

      (4)  

After that sub-paragraph insert—

    “(2)  

A class may consist of all the pensioner members of the pension

scheme.

      (3)  

Sub-paragraph (4) applies where—

(a)   

the annual rate of the individual’s pension is increased in

excepted circumstances (“the excepted increase”),

(b)   

before the end of the period of 12 months beginning with

the date of the excepted increase, the annual rate of the

individual’s pension is increased in circumstances which

would (apart from that sub-paragraph) be excepted

circumstances (“the subsequent increase”), and

(c)   

the class by virtue of which sub-paragraph (1)(b) is

satisfied on the subsequent increase (“the new class”) is not

the class by virtue of which it was satisfied on the excepted

increase.

      (4)  

If the purpose, or one of the main purposes, of the individual’s

being included in the new class is to increase the annual rate of the

individual’s pension without benefit crystallisation event 3

occurring, the subsequent increase is not in excepted

circumstances.”

8          

After that paragraph insert—

“Benefit crystallisation event 3: threshold annual rate

10A   (1)  

This paragraph applies for the purposes of benefit crystallisation

event 3.

      (2)  

The threshold annual rate is the annual rate of the pension on the

date of which the increase date is the first anniversary, increased

by the greatest of—

(a)   

the relevant percentage rate,

(b)   

the relevant indexation percentage, and

(c)   

£250,

           

and rounded up in accordance with sub-paragraph (8).

      (3)  

But if the person became entitled to the pension after the date of

which the increase date is the first anniversary, the threshold

annual rate is the annual rate of the pension on the date on which

the person became entitled to the pension, increased and rounded

up as mentioned in sub-paragraph (2).

      (4)  

The increase date is the date on which the individual becomes

entitled to payment of the pension at the increased annual rate.

      (5)  

The relevant percentage rate is—

(a)   

in a case where the pension is paid under a pension

scheme, or an arrangement under a pension scheme, in

relation to which the relevant valuation factor is a number

greater than 20, the rate agreed by the Commissioners for

 
 

Finance Bill (Volume II)
Schedule 29 — Further provision about pension schemes

359

 

Her Majesty’s Revenue and Customs and the scheme

administrator, and

(b)   

otherwise, 5%.

      (6)  

The relevant indexation percentage means—

(a)   

if the retail prices index for the reference month is higher

than the retail prices index for the same calendar month in

the previous year, the percentage increase in the retail

prices index, and

(b)   

if it is not, 0%.

      (7)  

The scheme administrator may select as the reference month any

month in the period of 12 months ending with the month in which

the increase date falls.

      (8)  

An amount is rounded up in accordance with this sub-paragraph

if it is rounded up to the next greatest amount which—

(a)   

where the pension is payable monthly, gives an amount of

whole pounds when divided by 12, or

(b)   

where the pension is payable weekly, gives an amount of

whole pounds when divided by 52.

      (9)  

If the pension is under a public service pension scheme, any

abatement of the pension is to be left out of account in determining

for the purposes of this paragraph the annual rate of the pension

on the date of which the increase date is the first anniversary (or,

where sub-paragraph (3) applies, the date on which the person

became entitled to the pension).

     (10)  

An individual who becomes entitled to payment of a scheme

pension at an increased annual rate on 29 February in any year is

to be treated for the purposes of this paragraph as having become

so entitled on 28 February in that year.

     (11)  

The Treasury may by order substitute for the amount for the time

being specified in sub-paragraph (2)(c) a different amount

(including an amount to be calculated as a percentage of the

standard lifetime allowance).”

9     (1)  

Paragraph 11 (benefit crystallisation event 3: permitted margin) is amended

as follows.

      (2)  

In sub-paragraph (6)—

(a)   

for “month in which the individual becomes entitled to payment of

the pension at the increased rate” substitute “reference month”, and

(b)   

for “month in which the individual became entitled to the pension”

substitute “base month”.

      (3)  

After sub-paragraph (7) insert—

   “(7A)  

The scheme administrator may select as the reference month any

month in the period of 12 months ending with the month in which

the individual becomes entitled to payment of the pension at the

increased rate.

     (7B)  

The base month is the month which is the same number of months

before the month in which the individual became entitled to the

pension, as the reference month is before the month in which the

 
 

 
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