Finance (No. 3) Bill

Session 2010 - 11
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Finance (No. 3) Bill

Finance (No. 3) Bill
Schedule 17 — Annual allowance charge
Part 1 — Amendments
285

““pensionable age” has the meaning given by the rules in
paragraph 1 of Schedule 4 to the Pensions Act 1995 or
paragraph 1 of Schedule 2 to the Pensions (Northern Ireland)
Order 1995,”.
22
In section 280(2) (general index), insert at the appropriate places—
5

“consumer prices index
section 279(1)”, and

“pensionable age
section 279(1)”.

23
In section 282(1A) (orders and regulations subject to Commons-only draft
affirmative procedure)—
(a)
for “227(5A),” substitute “237B(11),”, and
10
(b)
after “242(5)” insert “, no order may be made under section 228(2)
which specifies an amount for any tax year less than the annual
allowance for the immediately preceding tax year and no order may
be made under section 238A which increases any person’s liability to
tax”.
15
24    (1)
Schedule 34 (currently-relieved non-UK pension schemes etc) is amended as
follows.
      (2)
In paragraph 8(1), after “a currently-relieved non-UK pension scheme”
insert “and its scheme manager”.
      (3)
After paragraph 9 insert—
20
“9A   (1)
This paragraph applies where an individual—
(a)
is a currently-relieved member of a currently-relieved non-
UK pension scheme in relation to a tax year, but
(b)
was a member, but not a currently-relieved member, of the
currently-relieved non-UK pension scheme in relation to
25
any one or more of the 3 immediately preceding tax years
(a “relevant tax year”).
      (2)
Section 228A has effect in relation to the individual for the tax year
as it would if the individual had been a currently-relieved member
of the pension scheme for the relevant tax year (or each of the
30
relevant tax years) and paragraphs 10 and 11 of this Schedule were
omitted.
9B    (1)
This paragraph applies where an individual—
(a)
is a member of a registered pension scheme in relation to a
tax year, and
35
(b)
was a currently-relieved member of a currently-relieved
non-UK pension scheme in relation to any one or more of
the 3 immediately preceding tax years (a “relevant tax
year”).
      (2)
Section 228A has effect in relation to the individual for the tax year
40
as it would if the currently-relieved non-UK pension scheme had
been a registered pension scheme for the relevant tax year (or each
of the relevant tax years).”
      (4)
In paragraph 12(1), after “a currently-relieved non-UK pension scheme”
insert “and its scheme manager”.
45

Finance (No. 3) Bill
Schedule 17 — Annual allowance charge
Part 2 — Commencement and transitional provision
286

25
In Schedule 36 (transitional provision etc), omit paragraph 49
(disapplication of annual allowance charge for individuals with enhanced
protection) and the heading before it.
26    (1)
In FA 2009—
(a)
in Schedule 2, omit paragraph 15, and
5
(b)
in Schedule 35, omit paragraph 22.
      (2)
In the Registered Pension Schemes (Standard Lifetime and Annual
Allowances) Order 2010 (S.I. 2010/922), omit article 3.
Part 2
Commencement and transitional provision
10
27    (1)
The amendments made by Part 1 have effect for the tax year 2011-12 and
subsequent tax years.
      (2)
Apart from the amendments made by paragraph 16(2) and (4), such of the
amendments as apply in relation to pension input periods have effect in
relation to pension input periods ending in the tax year 2011-12 but
15
beginning earlier (as well as those beginning in that tax year).
28    (1)
This paragraph applies where—
(a)
the pension input period in respect of any arrangement relating to
the individual which ends in the tax year 2011-12 begins before 14
October 2010 (a “straddling pension input period”), and
20
(b)
the total pension input amount in the case of the individual for that
tax year exceeds £50,000.
      (2)
The following provisions apply for arriving at the amount in respect of
which the annual allowance charge is charged for that tax year (instead of
the charge being in respect of the amount by which the total pension input
25
amount exceeds the amount of the annual allowance).
      (3)
Treat each straddling pension input period as if it were 2 separate pension
input periods—
(a)
one beginning when the straddling pension input period begins and
ending with 13 October 2010 (a “pre-announcement period”), and
30
(b)
the other beginning with 14 October 2010 and ending when the
straddling pension input period ends (a “post-announcement
period”).

And treat any pension input period in respect of any arrangement relating
to the individual which ends in the tax year 2011-12 which is not a straddling
35
pension input period as if it were a post-announcement period.
      (4)
Arrive at the pension input amount in respect of each post-announcement
period (as if it were a pension input period ending in the tax year 2011-12)
and aggregate those amounts.
      (5)
Deduct £50,000 from that aggregate.
40

The result (or, if a negative amount, nil) is the post-announcement periods
total.
      (6)
Arrive at the pension input amount in respect of each pre-announcement
period (as if it were a pension input period ending in the tax year 2011-12)
and aggregate those amounts.
45

Finance (No. 3) Bill
Schedule 17 — Annual allowance charge
Part 2 — Commencement and transitional provision
287


In the case of a defined benefits arrangement, subsections (4) and (5) of
section 234 of FA 2004 are to apply for the purposes of this calculation as if
the references to “16” were to “10”.
      (7)
Deduct from that aggregate the difference between £255,000 and the lesser
of—
5
(a)
£50,000, and
(b)
the aggregate arrived at under sub-paragraph (4).

The result (or, if a negative amount, nil) is the pre-announcement periods
total.
      (8)
Aggregate the post-announcement periods total and the pre-announcement
10
periods total.
      (9)
Deduct any amount by which (apart from this paragraph) the annual
allowance in the case of the individual for the tax year would have been
increased by virtue of section 228A of FA 2004 or, if less, by so much of any
such amount as equals that aggregate.
15
     (10)
Any result is the amount in respect of which the annual allowance charge is
charged for the tax year 2011-12.
29
Where paragraph 28 applies in the case of the individual, section 228A of FA
2004 has effect in the case of the individual for tax years subsequent to the
tax year 2011-12—
20
(a)
as if the references in subsections (3)(a) and (b) of that section to the
amount of the annual allowance for that tax year were to £50,000, and
(b)
as if any amount deducted under sub-paragraph (9) of that
paragraph had been “used-up” within the meaning of that section.
30    (1)
This paragraph has effect in relation to the application of section 228A of FA
25
2004 for the tax years 2011-12, 2012-13 and 2013-14.
      (2)
The assumptions in sub-paragraph (3) are to be made in determining—
(a)
whether the amount of the annual allowance for the tax years 2008-
09, 2009-10 and 2010-11 exceeded the total pension input amount in
the case of the individual for the tax year, and
30
(b)
whether any excess of the annual allowance over the total pension
input amount in the case of the individual for any of those tax years
has been used up.
      (3)
The assumptions are—
(a)
that the annual allowance for each of the tax years 2008-09, 2009-10
35
and 2010-11 was £50,000, and
(b)
that the provisions of Part 4 of FA 2004 apply in relation to pension
input periods in respect of arrangements relating to the individual
that end in any of those tax years subject to the amendments made
by this Schedule (including that inserting section 228A).
40
31
In determining under section 233 of FA 2004 the pension input amount in
respect of an arrangement relating to an individual for a pension input
period of the arrangement that ends in the tax year 2009-10, 2010-11 or 2011-
12, there is to be deducted from what would otherwise be the pension input
amount so much of any contributions refund lump sum (within the meaning
45
of paragraph 15 of Schedule 35 to FA 2009) paid to the individual (or the
personal representatives of the individual) as is attributable to contributions
paid under the arrangement in the pension input period.

Finance (No. 3) Bill
Schedule 18 — Lifetime allowance charge
Part 1 — Amendments
288

32
Section 237B has effect in relation to the tax year 2011-12 as if the reference
in subsection (5)(a) of that section to 31 July in the year following that in
which the tax year ends were to 31 December 2013.
33
Section 254(7A) has effect in relation to the tax year 2011-12 as if the reference
in that provision to 31 December in the year following that in which the tax
5
year ends were to 31 March 2014.
34
Expressions used in this Part of this Schedule and Part 4 of FA 2004 have the
same meaning in this Part of this Schedule as in that Part of that Act.
Schedule 18
Section 67

Lifetime allowance charge
10
Part 1
Amendments
1
Part 4 of FA 2004 (pension schemes etc) is amended as follows.
2     (1)
Section 218 (individual’s lifetime allowance and standard lifetime
allowance) is amended as follows.
15
      (2)
For subsections (2) and (3) substitute—
“(2)
The standard lifetime allowance for the tax year 2012-13 and, subject
to subsection (3), subsequent tax years is £1,500,000.
(3)
The Treasury may by order provide that the standard lifetime
allowance for any tax year subsequent to the tax year 2012-13 is such
20
amount, not being less than the standard lifetime allowance for the
immediately preceding tax year, as is specified in the order.”
      (3)
After subsection (5) insert—
“(5A)
Where the operation of a lifetime allowance enhancement factor is
provided for by any of sections 220, 222, 223 and 224 and the time
25
mentioned in the definition of SLA in the section concerned was
before 6 April 2012, subsection (4) has effect as if the amount to be
multiplied by LAEF were £1,800,000 (the standard lifetime allowance
for the tax year 2011-12) if that is greater than SLA.
(5B)
Where the operation of a lifetime allowance enhancement factor is
30
provided for by paragraph 7 of Schedule 36, subsection (4) has effect
as if SLA were £1,800,000 (the standard lifetime allowance for the tax
year 2011-12) if that is greater than SLA.
(5C)
Where benefit crystallisation event 7 occurs on or after 6 April 2012
by reason of the payment of a relevant lump sum death benefit in
35
respect of the death of the individual before that date, the standard
lifetime allowance at the time of the benefit crystallisation event is
£1,800,000 (the standard lifetime allowance for the tax year 2011-12).”
3
Schedule 29 (authorised lump sums) is amended as follows.
4     (1)
Paragraph 7 (trivial commutation lump sum) is amended as follows.
40

Finance (No. 3) Bill
Schedule 18 — Lifetime allowance charge
Part 1 — Amendments
289

      (2)
In sub-paragraph (4), for “1% of the standard lifetime allowance on the
nominated date.” substitute “£18,000.”
      (3)
After that sub-paragraph insert—
   “(4A)
The Treasury may by order substitute for the amount for the time
being specified in sub-paragraph (4) such larger amount as is
5
specified in the order.”
5     (1)
Paragraph 10 (winding-up lump sum) is amended as follows.
      (2)
In sub-paragraph (2), for “1% of the standard lifetime allowance when the
lump sum is paid,” substitute “£18,000,”.
      (3)
After that sub-paragraph insert—
10
   “(2A)
The Treasury may by order substitute for the amount for the time
being specified in sub-paragraph (2) such larger amount as is
specified in the order.”
6     (1)
Paragraph 20 (trivial commutation lump sum death benefit) is amended as
follows.
15
      (2)
In sub-paragraph (2), for “1% of the standard lifetime allowance on the date
the lump sum is paid,” substitute “£18,000,”.
      (3)
After that sub-paragraph insert—
    “(3)
The Treasury may by order substitute for the amount for the time
being specified in sub-paragraph (2) such larger amount as is
20
specified in the order.”
7     (1)
Paragraph 21 (winding-up lump sum death benefit) is amended as follows.
      (2)
In sub-paragraph (2), for “1% of the standard lifetime allowance on the date
the lump sum is paid,” substitute “£18,000,”.
      (3)
After that sub-paragraph insert—
25
    “(3)
The Treasury may by order substitute for the amount for the time
being specified in sub-paragraph (2) such larger amount as is
specified in the order.”
8
Schedule 36 (transitional provision) is amended as follows.
9
In paragraph 16(3), for “standard lifetime allowance when the first relevant
30
event occurs.” substitute “underpinned lifetime allowance when the first
relevant event occurs; and “the underpinned lifetime allowance” is the
greater of the current standard lifetime allowance and £1,800,000 (the
standard lifetime allowance for the tax year 2011-12).”
10    (1)
Paragraph 28(3) is amended as follows.
35
      (2)
In the sub-paragraphs (6A) and (7) treated as substituted—
(a)
in the formula, for “CSLA” substitute “ULA”, and
(b)
for the definition of CSLA substitute—
“ULA is the underpinned lifetime allowance, and”.

Finance (No. 3) Bill
Schedule 18 — Lifetime allowance charge
Part 2 — Commencement and transitional provision
290

      (3)
After the sub-paragraph (7) treated as substituted insert—
   “(7A)
“The underpinned lifetime allowance” is the greater of the current
standard lifetime allowance and £1,800,000 (the standard lifetime
allowance for the tax year 2011-12).”
11    (1)
Paragraph 34(2) is amended as follows.
5
      (2)
In the sub-paragraph (5) treated as substituted, for “CSLA” substitute
“ULA”.
      (3)
In the sub-paragraph (7) treated as substituted, for the definition of CSLA
substitute—
“ULA is the underpinned lifetime allowance,”.
10
      (4)
After the sub-paragraph (7A) treated as substituted insert—
“(7AZA)
“The underpinned lifetime allowance” is the greater of the
current standard lifetime allowance and £1,800,000 (the standard
lifetime allowance for the tax year 2011-12).”
12
In the Registered Pension Schemes (Standard Lifetime and Annual
15
Allowances) Order 2010 (S.I. 2010/922), omit article 2.
Part 2
Commencement and transitional provision
13
The amendments made by Part 1 have effect for the tax year 2012-13 and
subsequent tax years.
20
14    (1)
This paragraph applies on and after 6 April 2012 in the case of an
individual—
(a)
who has one or more arrangements under a registered pension
scheme on that date,
(b)
in relation to whom paragraph 7 of Schedule 36 to FA 2004 (primary
25
protection) does not make provision for a lifetime allowance
enhancement factor, and
(c)
in relation to whom paragraph 12 of that Schedule (enhanced
protection) does not apply on that date,

if notice of intention to rely on it is given to an officer of Revenue and
30
Customs.
      (2)
The Commissioners for Her Majesty’s Revenue and Customs may make
regulations specifying how notice is to be given.
      (3)
Part 4 of FA 2004 has effect in relation to the individual as if the standard
lifetime allowance were the greater of the standard lifetime allowance and
35
£1,800,000 (the standard lifetime allowance for the tax year 2011-12).
      (4)
But this paragraph ceases to apply if on or after 6 April 2012—
(a)
there is benefit accrual in relation to the individual under an
arrangement under a registered pension scheme,
(b)
there is an impermissible transfer into any arrangement under a
40
registered pension scheme relating to the individual,

Finance (No. 3) Bill
Schedule 18 — Lifetime allowance charge
Part 2 — Commencement and transitional provision
291

(c)
a transfer of sums or assets held for the purposes of, or representing
accrued rights under, any such arrangement is made that is not a
permitted transfer, or
(d)
an arrangement relating to the individual is made under a registered
pension scheme otherwise than in permitted circumstances.
5
      (5)
For the purposes of sub-paragraph (4)(a) there is benefit accrual in relation
to the individual under an arrangement—
(a)
in the case of a money purchase arrangement that is not a cash
balance arrangement, if a relevant contribution is paid under the
arrangement on or after 6 April 2012,
10
(b)
in the case of a cash balance arrangement or a defined benefits
arrangement, if there is an increase in the value of the individual’s
rights under the arrangement at any time on or after that date (but
subject to sub-paragraph (12)), and
(c)
in the case of a hybrid arrangement—
15
(i)
where the benefits that may be provided to or in respect of
the individual under the arrangement include money
purchase benefits other than cash balance benefits, if a
relevant contribution is paid under the arrangement on or
after 6 April 2012, and
20
(ii)
in any case, if there is an increase in the value of the
individual’s rights under the arrangement at any time on or
after that date (but subject to sub-paragraph (12)).
      (6)
For the purposes of sub-paragraphs (5)(b) and (c)(ii) and (12) whether there
is an increase in the value of the individual’s rights under the arrangement
25
(and its amount if there is) is to be determined—
(a)
in the case of a cash balance arrangement (or a hybrid arrangement
under which cash balance benefits may be provided to or in respect
of the individual under the arrangement), by reference to whether
there is an increase in the amount that would, on the valuation
30
assumptions, be available for the provision of benefits to or in respect
of the member (and, if there is, the amount of the increase), and
(b)
in the case of a defined benefits arrangement (or a hybrid
arrangement under which defined benefits may be provided to or in
respect of the individual under the arrangement), by reference to
35
whether there is an increase in the benefits amount.
      (7)
For the purposes of sub-paragraph (6)(b) “the benefits amount” is—

where—
LS is the annual rate of the lump sum to which the individual would,
on the valuation assumptions, be entitled under the arrangement
40
(otherwise than by commutation of pension);
P is the annual rate of the pension which would, on the valuation
assumptions, be payable to the individual under the arrangement;
RVF is the relevant valuation factor.
      (8)
Paragraph 17A of Schedule 36 to FA 2004 (impermissible transfers) applies
45
for the purposes of sub-paragraph (4)(b) but as if the references to a relevant
existing arrangement were to the arrangement and the reference in sub-
paragraph (2) to 5 April 2006 were to 5 April 2012.