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Finance (No. 3) Bill


Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 2 — Consequential amendments

257

 

Pension Schemes (Northern Ireland) Act 1993

59         

Until such time as the repeal of section 24A of the Pension Schemes

(Northern Ireland) Act 1993 (requirements for interim arrangements) by

paragraph 11 of Schedule 4 to the Pensions Act (Northern Ireland) 2008 has

effect for all purposes, subsection (3) of that section has effect with the

5

following amendments—

(a)   

in paragraph (a)—

(i)   

for “unsecured pension year” substitute “drawdown pension

year”,

(ii)   

after “twelve months” insert “(disregarding the second

10

sentence of pension rule 5)”, and

(iii)   

for “where the member has not reached the age of 75,”

substitute “or”;

(b)   

in paragraph (c)—

(i)   

for “unsecured pension year” substitute “drawdown pension

15

year”,

(ii)   

after “twelve months” insert “(disregarding the second

sentence of pension death benefit rule 4)”, and

(iii)   

omit “and the member’s widow, widower or surviving civil

partner has not reached the age of 75, or”;

20

(c)   

omit paragraphs (b) and (d).

Income Tax (Earnings and Pensions) Act 2003

60    (1)  

Section 683 of ITEPA 2003 (PAYE income) is amended as follows.

      (2)  

In subsection (3), for “subsections (3A) and (4)” substitute “subsections (3A)

and (3B)”.

25

      (3)  

After subsection (3A) insert—

“(3B)   

“PAYE pension income” for a tax year does not include any taxable

pension income which is treated as accruing in that tax year by

section 579CA (temporary non-residents).”

61         

In Part 2 of Schedule 1 to ITEPA 2003 (index of defined expressions), at the

30

appropriate place insert—

 

“dependants’ income

section 579D”;

 
 

withdrawal (in Chapter

  
 

5A of Part 9)

  
 

“income withdrawal (in

section 579D”.

 

35

 

Chapter 5A of Part 9)

  

Finance Act 2004

62         

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

63         

In section 164 (authorised member payments), in subsection (2)(b), after “the

short service refund lump sum charge” insert “, the serious ill-health lump

40

sum charge”.

 
 

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 2 — Consequential amendments

258

 

64         

In section 165 (pension rules), in subsection (3)(a), for “unsecured pension”

substitute “drawdown pension”.

65         

In section 168(1) (lump sum death benefit rule), for paragraph (e)

substitute—

“(e)   

a drawdown pension fund lump sum death benefit,”.

5

66         

In section 169 (recognised transfers), in subsection (1D)—

(a)   

in paragraph (a), for “person’s unsecured pension fund or

dependant’s unsecured pension fund” substitute “member’s

drawdown pension fund or dependant’s drawdown pension fund”;

(b)   

omit paragraph (b) (and the “or” before it).

10

67    (1)  

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

follows.

      (2)  

In sub-paragraph (2)(b), for “member’s unsecured pension fund or

dependant’s unsecured pension fund” substitute “member’s drawdown

pension fund or dependant’s drawdown pension fund”.

15

      (3)  

In sub-paragraph (7A)—

(a)   

in paragraph (a), for “dependants’ unsecured pension fund or

dependants’ alternatively secured pension fund” substitute

“dependant’s drawdown pension fund”;

(b)   

in paragraph (b), for “dependants’ unsecured pension fund”

20

substitute “dependant’s drawdown pension fund”.

      (4)  

Omit sub-paragraph (8A).

68         

Omit section 172BA (increase in rights on death arising from alternatively

secured pension fund etc).

69         

Omit section 181A (minimum level of payment of alternatively secured

25

pensions).

70    (1)  

Section 182 (unauthorised borrowing: money purchase arrangements) is

amended as follows.

      (2)  

In subsection (3)—

(a)   

in paragraph (a), for “member’s unsecured pension fund or

30

alternatively secured pension fund” substitute “member’s

drawdown pension fund”;

(b)   

in paragraph (b), for “dependants’ unsecured pension funds or

alternatively secured pension funds” substitute “dependants’

drawdown pension funds”.

35

      (3)  

In subsection (5), for “unsecured pension fund or alternatively secured

pension fund” substitute “drawdown pension fund”.

71         

In section 211 (surchargeable unauthorised member payments: valuation of

crystallised rights), in subsection (1)(b), for “member’s unsecured pension

fund or alternatively secured pension fund” substitute “member’s

40

drawdown pension fund”.

72         

In section 212 (surchargeable unauthorised member payments: valuation of

uncrystallised rights), in subsection (2), for “member’s unsecured pension

fund or alternatively secured pension fund” substitute “member’s

drawdown pension fund”.

45

 
 

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 2 — Consequential amendments

259

 

73    (1)  

In section 216 (benefit crystallisation events and amounts crystallised), the

table in subsection (1) is amended as follows.

      (2)  

In the entry for benefit crystallisation event 1, for “unsecured pension”

substitute “drawdown pension”.

      (3)  

In the entry for benefit crystallisation event 5A—

5

(a)   

for “unsecured pension” substitute “drawdown pension”;

(b)   

for “individual’s unsecured pension fund” substitute “individual’s

drawdown pension fund”.

74         

In section 241(1) (scheme chargeable payment), omit paragraph (aa) (and the

“and” after it).

10

75         

In section 268 (unauthorised payments surcharge and scheme sanction

charge), in subsection (6), omit—

(a)   

“172BA,”, and

(b)   

“or arises under section 181A”.

76         

In section 273A (insurance company liable as scheme administrator), in

15

subsection (1), for paragraph (c) substitute—

“(c)   

a drawdown pension fund lump sum death benefit,”.

77    (1)  

Section 280(2) (general index) is amended as follows.

      (2)  

Omit the entries relating to “dependant’s alternatively secured pension

fund” and “member’s alternatively secured pension fund”.

20

      (3)  

Omit the entries relating to “dependant’s unsecured pension fund” and

“member’s unsecured pension fund” and at the appropriate place insert—

 

“dependant’s drawdown

paragraph 22 of

 
 

pension fund

Schedule 28”;

 
 

“member’s drawdown

paragraph 8 of Schedule

 

25

 

pension fund

28”.

 

      (4)  

At the appropriate place insert—

 

“serious ill-health lump sum

section 205A(1)”.

 
 

charge

  

      (5)  

Omit the entry relating to “unsecured pension fund lump sum death

30

benefit” and at the appropriate place insert—

 

“drawdown pension fund

paragraph 17 of Schedule

 
 

lump sum death benefit

29”.

 

78         

In Schedule 28 (pension rules), omit the following provisions—

(a)   

paragraph 5 (meaning of “alternatively secured pension”);

35

(b)   

paragraphs 11 to 13 (member’s alternatively secured pension fund

etc);

 
 

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 2 — Consequential amendments

260

 

(c)   

paragraph 19 (meaning of “dependants’ alternatively secured

pension”);

(d)   

paragraphs 25 to 27 (dependant’s alternatively secured pension fund

etc).

79    (1)  

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

5

      (2)  

In paragraph 1 (pension commencement lump sum), in sub-paragraph

(3)(b), omit “, otherwise than by virtue of the operation of paragraph 8(2) of

Schedule 28,”.

      (3)  

In paragraph 3 (pension commencement lump sum: calculation of

applicable amount)—

10

(a)   

in sub-paragraph (1)(a), for “unsecured pension” substitute

“drawdown pension”;

(b)   

in sub-paragraph (5)(a), for “member’s unsecured pension fund”

substitute “member’s drawdown pension fund”;

(c)   

in sub-paragraph (8)(a), for “member’s unsecured pension fund”

15

substitute “member’s drawdown pension fund”.

      (4)  

In paragraph 15 (uncrystallised funds lump sum death benefit), in sub-

paragraph (2)(b), for “unsecured pension” substitute “drawdown pension”.

80    (1)  

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

follows.

20

      (2)  

In paragraph 3 (benefit crystallisation events 1 and 2: prevention of

overlap)—

(a)   

in sub-paragraph (1), for “unsecured pension fund” substitute

“drawdown pension fund”;

(b)   

in sub-paragraph (2), for “unsecured pension” substitute

25

“drawdown pension”.

      (3)  

In paragraph 4 (benefit crystallisation events 1 and 4: prevention of

overlap)—

(a)   

in sub-paragraph (1), for “unsecured pension fund” substitute

“drawdown pension fund”;

30

(b)   

in sub-paragraph (2), for “unsecured pension” substitute

“drawdown pension”.

      (4)  

In paragraph 5 (benefit crystallisation events 1 and 5: hybrid arrangements),

in sub-paragraph (2), omit the words from “(with the effect that” to the end.

      (5)  

In paragraph 17 (benefit crystallisation event 8: prevention of overlap with

35

other events), in sub-paragraph (2)—

(a)   

for “unsecured pension fund” substitute “drawdown pension fund”;

(b)   

for “unsecured pension” substitute “drawdown pension”.

81    (1)  

Schedule 34 (non-UK schemes: application of certain charges) is amended as

follows.

40

      (2)  

In paragraph 1(3) (member payment charges), after paragraph (c) insert—

“(ca)   

the serious ill-health lump sum charge,”.

      (3)  

After paragraph 4 insert—

“4A   (1)  

For the purposes of determining whether a person meets the

flexible drawdown conditions in section 165(3A) or 167(2A)—

45

 
 

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 2 — Consequential amendments

261

 

(a)   

any reference in paragraph 14A or 24C of Schedule 28

(minimum income requirement) to payments made to or in

respect of a member of a registered pension scheme

includes a reference to payments made to or in respect of a

relieved member or transfer member of a relevant non-UK

5

scheme,

(b)   

any tax-relieved contributions made under a relevant non-

UK scheme by or on behalf of, or in respect of, a member of

the scheme are to be treated as if they were relevant

contributions paid under a registered pension scheme,

10

(c)   

any tax-exempt provision made under a relevant non-UK

scheme in relation to a member of the scheme is to be

treated as if it was a relevant contribution paid under a

registered pension scheme, and

(d)   

a person who is an active member of a relevant non-UK

15

scheme is to be treated as if the person were an active

member of a registered pension scheme.

      (2)  

In this paragraph—

“relevant contributions” has the meaning given by paragraph

14D or 24F of Schedule 28;

20

“tax-exempt contributions” and “tax-exempt provision” have

the same meaning as in paragraph 3 of this Schedule.”

      (4)  

In paragraph 5—

(a)   

for “Sections 205 and 206” substitute “Sections 205 to 206”;

(b)   

after “short service refund lump sum charge” insert “, serious ill-

25

health lump sum charge”.

      (5)  

Omit paragraph 7ZA (unauthorised payment charge: alternatively secured

pension etc).

82    (1)  

Schedule 36 (transitional provisions and savings) is amended as follows.

      (2)  

In paragraph 20 (amount of lifetime allowance available to person who had

30

right to payment of pension on 5 April 2006), for sub-paragraph (4)

substitute—

    “(4)  

In the case of drawdown pension, ARP is—

(a)   

the maximum amount that may be paid in the drawdown

pension year in which the time falls in accordance with

35

pension rule 5 (see section 165), or

(b)   

in the case of an arrangement to which subsection (3A) of

section 165 applies, the maximum amount that could have

been paid in accordance with that rule in the drawdown

pension year in which that subsection first applied to the

40

arrangement if it had not so applied.”

      (3)  

In paragraph 28 (lump sum rights for members with enhanced protection),

in sub-paragraph (3), for “sub-paragraphs (5) to (7)” substitute “sub-

paragraphs (5) to (7A)”.

      (4)  

In paragraph 29 (lump sum rights for members with enhanced protection)—

45

(a)   

in sub-paragraph (2), in the text treated as substituted for sub-

paragraphs (1) to (3) of paragraph 3 of Schedule 29, for “unsecured

pension” (in both places) substitute “drawdown pension”;

 
 

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 2 — Consequential amendments

262

 

(b)   

in sub-paragraph (3), in the text treated as substituted for sub-

paragraphs (5) to (7A) of that paragraph—

(i)   

for “member’s unsecured pension fund” substitute

“member’s drawdown pension fund”, and

(ii)   

for the definition of “AC” substitute—

5

“AC is—

(a)   

in a case where the member becomes entitled

to the pension before reaching the age of 75,

the amount crystallised by reason of the

member becoming entitled to the pension,

10

and

(b)   

in a case where the member becomes entitled

to the pension after reaching that age, the

amount that would have been so crystallised

but for paragraph 2 of Schedule 32.”

15

      (5)  

In paragraph 34 (entitlement to lump sums exceeding 25% of uncrystallised

rights), in sub-paragraph (2), in the text treated as substituted for sub-

paragraphs (5) to (8) of paragraph 2 of Schedule 29, for the definition of “AC”

substitute—

“AC is—

20

(a)   

in a case where the member becomes entitled to the

pension in connection with which the lump sum is

paid before reaching the age of 75, the amount

crystallised by reason of the member becoming

entitled to the pension, and

25

(b)   

in a case where the member becomes entitled to that

pension after reaching that age, the amount that

would have been so crystallised but for paragraph 2

of Schedule 32,

(but this is subject to sub-paragraphs (7AA) and (7B)),”.

30

      (6)  

In paragraph 36 (right to payment of lump sum death benefit)—

(a)   

in sub-paragraph (3)—

(i)   

after paragraph (a) insert “and”, and

(ii)   

omit paragraph (c) (and the “and” before it);

(b)   

omit sub-paragraphs (4) and (8);

35

(c)   

in sub-paragraph (9)—

(i)   

for “, annuity protection lump sum death benefit or

unsecured pension fund lump sum death benefit” substitute

“or annuity protection lump sum death benefit”, and

(ii)   

for “sub-paragraphs (3) to (8)” substitute “sub-paragraphs (3)

40

to (7)”;

(d)   

in sub-paragraph (10)(a), for “, annuity protection lump sum death

benefit or unsecured pension fund lump sum death benefit”

substitute “or annuity protection lump sum death benefit”;

(e)   

in sub-paragraph (11), in the definition of “TPLS”, for “, annuity

45

protection lump sum death benefit or unsecured pension fund lump

sum death benefit” substitute “or annuity protection lump sum

death benefit”.

 
 

Finance (No. 3) Bill
Schedule 16 — Benefits under pension schemes
Part 3 — Commencement and transitional provision

263

 

Income Tax Act 2007

83         

In section 30(1) of ITA 2007 (additional tax), after the entry relating to section

205 of FA 2004 insert—

“section 205A of FA 2004 (pension schemes: the serious ill-

health lump sum charge),”.

5

Consequential repeals

84         

In consequence of the amendments made by this Schedule, omit the

following provisions—

(a)   

in Schedule 10 to FA 2005, paragraphs 18(4), 20, 23 and 25(3);

(b)   

in FA 2006—

10

(i)   

in Schedule 22, paragraphs 3 to 9, 10(3) and 12, and

(ii)   

in Schedule 23, paragraph 29;

(c)   

in FA 2007—

(i)   

in Schedule 19, paragraphs 2(3), 4, 11, 12(2) and (5), 13 to 15,

16(2) to (4) and (6), 18(4), 20 to 26 and 29(2), (4) and (5), and

15

(ii)   

in Schedule 20, paragraphs 11(3) and 13;

(d)   

in FA 2008—

(i)   

in Schedule 4, paragraphs 4 and 9(2),

(ii)   

in Schedule 28, paragraphs 6 to 14, and

(iii)   

in Schedule 29, paragraph 16;

20

(e)   

in F(No.2)A 2010—

(i)   

section 6, and

(ii)   

Schedule 3.

Part 3

Commencement and transitional provision

25

General

85         

Subject to the provisions of this Part, the amendments made by this Schedule

have effect for the tax year 2011-12 and subsequent tax years.

Entitlement to unsecured or alternatively secured pension on 5 April 2011

86         

Any person who, immediately before 6 April 2011, was entitled to

30

unsecured pension or alternatively secured pension is to be treated, on and

after that date, as entitled to drawdown pension.

87         

Paragraph 6 of Schedule 28 to FA 2004 (short-term annuity) has effect on and

after 6 April 2011 as if the reference to an annuity purchased by the

application of sums or assets representing the whole or any part of the

35

member’s drawdown pension fund in respect of an arrangement included a

reference to an annuity purchased before that date by the application of

sums or assets representing the whole or any part of the member’s

unsecured pension fund in respect of the arrangement.

 
 

 
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Revised 31 March 2011