Source: http://www.legislation.gov.uk/ukpga/2004/12/schedule/36/enacted
Timestamp: 2018-01-20 14:50:23
Document Index: 488518517

Matched Legal Cases: ['art 1', 'art 14', 'art 14', 'art 14', 'art 2', 'art 14', 'art 14', 'art 3']

SCHEDULE 36Pension schemes etc: transitional provisions and savings
Part 1Pre-commencement pension schemes
Opting out of deemed registration
2(1)Paragraph 1 (1) does not apply to a pension scheme if the relevant administrator has, at any time before 6th April 2006, notified the Inland Revenue that the pension scheme is not to become a registered pension scheme on that date.
(2)If, by virtue of sub-paragraph (1) of this paragraph, sub-paragraph (1) of paragraph 1 does not apply to a pension scheme within any of paragraphs (a) to (d), (f) and (g) of that sub-paragraph, income tax is to be charged at the rate of 40% on the relevant amount.
(3)The relevant amount is an amount equal to the aggregate of—
(a)the amount of the sums held for the purposes of the pension scheme immediately before 6th April 2006, and
(b)the market value (at that time) of the assets held for the purposes of the pension scheme at that time.
(4)The liability to income tax is a liability of the person who is the relevant administrator on 5th April 2006 or, if more than one person is the relevant administrator on that date, is a joint and several liability of those persons.
(5)Where tax is charged in accordance with sub-paragraph (2), for the purposes of TCGA 1992 the assets which immediately before 6th April 2006 are held for the purposes of the pension scheme—
(a)are to be treated as having been acquired at that time for a consideration equal to the amount on which tax is charged by virtue of sub-paragraph (2) by the person who would be chargeable in respect of a chargeable gain accruing on a disposal of the assets on that date, and
(b)are not to be treated as having been disposed of by any person at that time.
(6)“Relevant administrator” means—
(a)in the case of a pension scheme within paragraph 1(1)(a), (b) or (c), the person who is, or the persons who are, the administrator of the pension scheme under section 611AA of ICTA,
(b)in the case of a pension scheme within paragraph 1(1)(d) or (f), the trustee or trustees of the pension scheme, or the insurance company which is a party to the contract in which the pension scheme is comprised,
(c)in the case of a pension scheme within paragraph 1(1)(e), the trustees of the scheme or fund, and
(d)in the case of a pension scheme within paragraph 1(1)(g), the person who is referred to in section 638 (1) of ICTA.
(7)If paragraph 1 (1) does not apply to a pension scheme by virtue of sub-paragraph (1), sections 431B(2) and 466(2B) of ICTA (meaning of pension business: pension scheme ceasing to be a registered pension scheme) apply as if the pension scheme had ceased to be a registered pension scheme at the beginning of 6th April 2006.
Power to modify rules of existing schemes
3(1)The Board of Inland Revenue may by regulations make any modifications of the rules of pension schemes to which paragraph 1 (1) applies if the modifications appear appropriate in consequence of, or in connection with, the provision made by this Part (or the repeals made by this Act in consequence of the provision made by this Part).
(2)Any modifications of the rules of a pension scheme made by the regulations have effect until the earlier of—
(a)the first date after 5th April 2006 on which amendments of the rules of the pension scheme take effect, and
(b)the end of the tax year 2008-09.
(3)The modifications that may be made by the regulations include, in particular—
(a)modifications for relieving pension schemes of obligations to make payments which, on and after 6th April 2006, would be unauthorised payments, and
(b)modifications of provisions (however expressed) referring to any limit contained in, or relevant in relation to approval under or for the purposes of, any provision of Part 14 of ICTA (pension schemes etc.) as it has effect at any time before 6th April 2006.
4(1)Where under paragraph 1 (1) a pension scheme is treated as becoming a registered pension scheme on 6th April 2006, (despite anything in section 270) the following person is, or the following persons are, to be treated as becoming the scheme administrator of the pension scheme on that date.
(2)If the pension scheme is within paragraph 1(1)(a), (b) or (c) immediately before that date, the person who is, or the persons who are, the administrator of the pension scheme under section 611AA of ICTA immediately before that date is or are to be treated as becoming the scheme administrator.
(3)If the pension scheme is within paragraph 1(1)(d) or (f) immediately before that date, the trustee or trustees of the pension scheme, or the insurance company which is a party to the contract in which the pension scheme is comprised, is or are to be treated as becoming the scheme administrator.
(4)If the pension scheme is within paragraph 1(1)(e) immediately before that date, the trustees of the scheme or fund are to be treated as becoming the scheme administrator.
(5)If the pension scheme is within paragraph 1(1)(g) immediately before that date, the person who is referred to in section 638 (1) of ICTA in relation to the pension scheme immediately before that date is to be treated as becoming the scheme administrator.
Post-commencement withdrawal of approval
5(1)The repeal by this Act of—
(a)section 591B (1) of ICTA (withdrawal of approval of retirement benefits scheme),
(b)section 620(7) of ICTA (withdrawal of approval of retirement annuity contract), and
(c)section 650 (1) of ICTA (withdrawal of approval of approved personal pension arrangements),
does not prevent the withdrawal of an approval under any of those provisions at any time after 5th April 2006 (from any earlier date until 6th April 2006).
(2)A withdrawal of approval made under any of those provisions by virtue of sub-paragraph (1) has the same consequences as a withdrawal of approval made under the provision concerned before 6th April 2006, so that (in particular)—
(a)sections 591C and 591D of ICTA (tax on cessation of approval of retirement benefits scheme), or
(b)sections 650A and 651 of ICTA (charge on cessation of approval of personal pension arrangements and appeal against such withdrawal of such approval),
apply where they would have applied had the approval been withdrawn before that date.
Pre-commencement liabilities of scheme administrator
6Any liabilities or obligations of—
(a)the administrator of a retirement benefits scheme (within the meaning of Chapter 1 of Part 14 of ICTA), or
(b)the scheme administrator of a personal pension scheme (within the meaning of Chapter 4 of Part 14 of ICTA),
incurred in relation to the scheme before 6th April 2006 or by virtue of paragraph 4 are (on and after that date) to be treated as liabilities or obligations of the scheme administrator of the scheme.
Part 2Pre-commencement rights: lifetime allowance charge
8(1)The value of the individual’s relevant uncrystallised pension rights on 5th April 2006 is the aggregate value of the individual’s uncrystallised rights on that date under each relevant pension arrangement relating to the individual.
(2)An arrangement is a “relevant pension arrangement” if it is an arrangement under a pension scheme within paragraph 1(1).
(3)For the purposes of this paragraph the individual’s rights are “uncrystallised” if the individual has not, on 5th April 2006, become entitled to the present payment of benefits in respect of the rights.
(4)And the individual is to be treated as entitled to the present payment of benefits in respect of any accrued rights in relation to which the individual has (under section 634A (1) of ICTA) made an election to defer the purchase of an annuity.
(5)For the purposes of this paragraph the value of the individual’s uncrystallised rights on 5th April 2006 under an arrangement is to be calculated in accordance with section 212 (valuation of uncrystallised rights for purposes of section 210) on the assumption that the individual became entitled to the present payment of benefits in respect of the rights on that date.
(6)Section 212 has effect for the purposes of sub-paragraph (5) as if the reference to such age (if any) as must have been reached to avoid any reduction in benefits on account of age in paragraph (a) of section 277 were to the relevant age; and for this purpose “the relevant age” is—
(a)if on 10th December 2003 the terms of the arrangement made provision for a reduction in the amount of benefits payable in respect of rights under the arrangement on account of the holder of the rights being below a particular age, that age, and
(b)otherwise, 60.
9(1)This paragraph applies if any of the individual’s uncrystallised rights on 5th April 2006 are rights under one or more arrangements under a pension scheme or schemes within paragraph 1(1)(a) to (d).
(2)The value of the individual’s uncrystallised rights on 5th April 2006 under the arrangement, or the aggregate of the values of the individual’s uncrystallised rights on 5th April 2006 under such of the arrangements as relate to a particular employment, is the lower of—
(a)the value, or the aggregate of the values, calculated under paragraph 8, and
(b)the amount arrived at in accordance with sub-paragraph (3).
(3)The amount arrived at in accordance with this sub-paragraph is—
20 × MPP
where MPP is the maximum permitted pension.
(4)“The maximum permitted pension” means the maximum annual pension that could be paid to the individual on 5th April 2006 under the arrangement or arrangements if it or they were made under a pension scheme within paragraph 1(1)(a) without giving the Board of Inland Revenue grounds for withdrawing approval of the pension scheme under section 591B of ICTA.
(5)For the purposes of sub-paragraph (4) it is to be assumed—
(a)if the individual was in the employment to which the arrangement or arrangements relates or relate on 5th April 2006, that the individual left the employment on that date, and
(b)if the individual had not reached the lowest age at which a pension may be paid under a pension scheme within paragraph 1(1)(a) to a person in good health without giving the Board of Inland Revenue grounds for withdrawing the approval of the pension scheme, that that fact would not give the Board such grounds.
(6)For the purposes of this paragraph an arrangement relating to an individual relates to an employment if—
(a)the earnings by reference to which benefits under the arrangement are calculated are earnings from the employment, or
(b)the person who is the employer in relation to the employment pays contributions under the arrangement in respect of the individual.
10(1)The value of the individual’s relevant crystallised pension rights on 5th April 2006 is—
where ARP is an amount equal to the annual rate at which any relevant existing pension is payable to the individual on 5th April 2006 or, if more than one relevant existing pension is payable to the individual on that date, to the aggregate of the annual rates at which each of the relevant existing pensions is so payable.
(2)“Relevant existing pension” means—
(a)a pension under a retirement benefits scheme approved for the purposes of Chapter 1 of Part 14 of ICTA,
(b)a pension under a former approved superannuation fund (defined as for the purposes of paragraph 1(1)(b)),
(c)a pension under a relevant statutory scheme, as defined in section 611A of ICTA, or a pension scheme treated by the Inland Revenue as if it were such a relevant statutory scheme,
(d)an annuity (or pension in the form of income drawdown) under an annuity contract by means of which benefits provided under a pension scheme within paragraph (a), (b) or (c) have been secured,
(e)a pension under a scheme or fund mentioned in section 613(4)(b) to (d) of ICTA (Parliamentary pension schemes or funds),
(f)an annuity under an annuity contract or trust scheme approved under section 620 or 621 of ICTA or a substituted contract within the meaning of section 622(3) of ICTA,
(g)an annuity acquired using funds held for the purposes of a personal pension scheme approved under Chapter 4 of Part 14 of ICTA, or
(h)a right to make income withdrawals under section 634A of ICTA.
(3)But a pension, annuity or right is not a relevant existing pension if entitlement to it was attributable to the death of any person.
(4)In the case of a pension within sub-paragraph (2) taking the form of income drawdown, the annual rate at which the pension is payable on 5th April 2006 is the amount which, on that date, is the maximum annual amount that may be drawn down by the individual as income in accordance with the pension scheme or contract concerned.
(5)In the case of a right which is a relevant existing pension by virtue of sub-paragraph (2)(h), the annual rate at which the pension is payable on 5th April 2006 is the maximum amount of income withdrawals that may be made by the individual in the period of 12 months referred to in section 634A(4) of ICTA during which 5th April 2006 falls.
(a)paragraph 7 makes provision for the operation of a lifetime allowance enhancement factor in relation to an individual, and
(b)on or after 6th April 2006, the rights of the individual under a relevant pension arrangement (see paragraph 8(2)) relating to the individual are reduced by becoming subject to a pension debit.
(2)The primary protection factor (see paragraph 7(3)) is to be recalculated.
(3)The recalculation involves reducing RR (see paragraph 7(3)) by the amount by which the individual’s rights are reduced and arriving at a revised primary protection factor.
(4)The revised primary protection factor operates in relation to any benefit crystallisation event occurring in relation to the individual after the time when the individual’s rights are reduced by becoming subject to the pension debit.
12(1)This paragraph applies on and after 6th April 2006 in the case of an individual who has one or more relevant existing arrangements if notice of intention to rely on it is given to the Inland Revenue in accordance with regulations made by the Board of Inland Revenue.
(2)But this paragraph ceases to apply if—
(a)relevant benefit accrual occurs under the arrangement, or any of the arrangements (see paragraph 13),
(b)a transfer of sums or assets held for the purposes of, or representing accrued rights under, the arrangement or any of the arrangements is made that is not a permitted transfer, or
(c)an arrangement relating to the individual is made under a registered pension scheme otherwise than solely for the purposes of a permitted transfer.
(3)Where this paragraph applies in the case of an individual there is no liability to the lifetime allowance charge in respect of the individual.
(4)An individual has a relevant existing arrangement if—
(a)before 6th April 2006 an arrangement relating to the individual has been made under a pension scheme within paragraph 1(1), and
(b)the pension scheme becomes a registered pension scheme on that date.
(5)Notice of intention to rely on this paragraph in relation to the individual may not be given in a case where—
(a)the value of the uncrystallised rights of the individual on 5th April 2006 under an arrangement, or
(b)the aggregate of the values of the uncrystallised rights of the individual on 5th April 2006 under arrangements,
is arrived at in accordance with paragraph 9 unless such rights as, in accordance with regulations made by the Board of Inland Revenue, are to be treated as representing the relevant excess have been surrendered.
(6)In sub-paragraph (5) “the relevant excess” means the amount by which the value of—
(a)the individual’s uncrystallised rights, or
(b)the aggregate of the values of the individual’s uncrystallised rights,
as arrived at in accordance with paragraph 8 exceeds what it would be if arrived at under paragraph 9.
(7)For the purposes of this paragraph and paragraphs 13 and 15, a transfer of sums or assets held for the purposes of, or representing accrued rights under, an arrangement is a permitted transfer if—
(a)all sums and assets held for the purposes of, or representing rights under, the arrangements relating to the individual under the pension scheme under which the arrangement is made are transferred by the transfer,
(b)the sums or assets held for the purposes of, or representing accrued rights under, the arrangement are transferred so that sub-paragraph (8) applies in relation to them, and
(c)the aggregate of the amount of those sums and the market value of those assets is, applying normal actuarial practice, equivalent before and after the transfer.
(8)This sub-paragraph applies in relation to sums or assets held for the purposes of, or representing accrued rights under, the arrangement if—
(a)they are transferred so as to become held for the purposes of a money purchase arrangement that is not a cash balance arrangement, or two or more money purchase arrangements that are not cash balance arrangements, under a registered pension scheme or recognised overseas pension scheme, or
(b)where the transfer occurs in connection with the winding up of the pension scheme under which the arrangement is made and the arrangement is a cash balance arrangement or a defined benefits arrangement, they are transferred so as to become held for the purposes of, or to represent rights under, a cash balance arrangement or defined benefits arrangement relating to the same employment as the arrangement and made under a registered pension scheme or recognised overseas pension scheme.
(9)Where there is a permitted transfer—
(a)if the transfer is a permitted transfer by virtue of sub-paragraph (8)(a), this paragraph (and paragraphs 13 and 14) apply in relation to the arrangement, or each of the arrangements, to which the transfer is made, and
(b)if the transfer is a permitted transfer by virtue of sub-paragraph (8)(b), this paragraph (and paragraphs 13 and 15) apply as if the arrangement to which the transfer is made were the same as that from which it is made.
13Relevant benefit accrual occurs in relation to an 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 (see paragraph 14), and
(b)in the case of a cash balance arrangement or defined benefits arrangement, if, when a benefit crystallisation event or transfer that is a permitted transfer by virtue of paragraph 12(8)(a) (a “relevant event”) occurs in relation to the individual and the arrangement, the relevant crystallised amount exceeds the appropriate limit (see paragraph 15).
14(1)For the purposes of paragraph 13(a) a relevant contribution is paid under the arrangement if—
(a)a relievable pension contribution is paid by or on behalf of the individual under the arrangement,
(b)a contribution is paid in respect of the individual under the arrangement by an employer of the individual, or
(c)a contribution paid by an employer of the individual otherwise than in respect of the individual subsequently becomes held for the purposes of the provision under the arrangement of benefits to or in respect of the individual.
(2)But the following are not relevant contributions for the purposes of paragraph 13(a)—
(a)contributions which may be applied only for the provision of benefits in respect of the individual after the individual’s death, and
(b)minimum payments under section 8 of the Pension Schemes Act 1993 (c. 48) or section 4 of the Pension Schemes (Northern Ireland) Act1993 (c. 49) or any amount recovered under regulations made under subsection (3) of either of those sections.
15(1)For the purposes of paragraph 13(b) “the relevant crystallised amount” is—
(a)if the relevant event is the first relevant event occurring in relation to the individual and to the arrangement or any other cash balance arrangement or defined benefits arrangement related to the arrangement (“the first relevant event”), the amount crystallised by that event, and
(b)otherwise, the aggregate of the amount crystallised by the relevant event and the amount crystallised by the relevant event, or by each of the relevant events, which has or have previously occurred in relation to the individual and to the arrangement or any other cash balance arrangement or defined benefits arrangement related to the arrangement.
(2)If the relevant event is a permitted transfer which is not a benefit crystallisation event, sub-paragraph (1) applies as if the amount crystallised by the event were the aggregate of—
(a)the amount of any sums held for the purposes of, or representing accrued rights under, the arrangement, and
(b)the market value of any assets held for the purposes of, or representing accrued rights under, the arrangement.
(3)For the purposes of this paragraph (and paragraph 16) another arrangement is related to the arrangement if—
(a)the other arrangement relates to the individual, and
(b)both the arrangement and the other arrangement relate to the same employment;
and whether an arrangement relates to an employment is to be determined in accordance with paragraph 9(6).
(4)For the purposes of paragraph 13(b) “the appropriate limit”, in relation to a relevant event, is the greater of—
(a)the value of the individual’s rights on 5th April 2006 under the arrangement, or (where there is or are one or more other cash balance arrangements or defined benefits arrangements related to the arrangement) the aggregate of the value of the individual’s rights under the arrangement and the other arrangement or arrangements, arrived at in accordance with paragraphs 8 and 9, as increased by the relevant indexation percentage (see sub-paragraph (5)), and
(b)what would be the value of those rights, so arrived at, on the assumptions specified in sub-paragraph (6).
(5)For the purposes of sub-paragraph (4)(a) “the relevant indexation percentage”, in relation to a relevant event, means whichever is the greatest of—
(a)the percentage by which an amount would be increased if it were increased for the period beginning with 6th April 2006 and ending with the date on which the relevant event occurs at an annual rate of 5%,
(b)the percentage by which an amount would be increased if it were increased for that period at an annual percentage rate referred to in regulations made by the Board of Inland Revenue, and
(c)the percentage by which the retail prices index for the month in which the relevant event occurs is higher than that for April 2006.
(6)The assumptions referred to in sub-paragraph (4)(b) are—
(a)that the individual’s age on 5th April 2006 were what it is at the time of the first relevant event (so that neither paragraph 8(6) nor section 277(a) applies in arriving at what would be the value of the rights under paragraph 8), and
(b)that the amount of the earnings which would have fallen to be taken into account under the arrangement for calculating the amount of benefits payable to or in respect of the individual (if the individual became entitled to the present payment of benefits in respect of the rights under the arrangement on that date) were the lesser of the two amounts specified in sub-paragraph (7).
(7)The amounts referred to in sub-paragraph (6)(b) are—
(a)the current amount of the relevant pensionable earnings immediately before the first relevant event, and
(b)the post-commencement earnings limit (see paragraphs 16 and 17).
(8)But sub-paragraph (6)(b) applies in relation to an arrangement under a pension scheme within paragraph 1(1)(c) or (e) as if for “the lesser of the two amounts specified in sub-paragraph (7)” there were substituted “the amount specified in sub-paragraph (7)(a)”.
(9)In this paragraph “the relevant pensionable earnings” means the description of earnings (or the portion of the description of earnings) of the individual by reference to which the amount of benefits payable to or in respect of the individual would have fallen to be calculated if the individual became entitled to the present payment of benefits in respect of the rights under the arrangement on 5th April 2006.
(10)For the purposes of sub-paragraph (7)(a) “the current amount” of the relevant pensionable earnings immediately before the first relevant event is the amount of the relevant pensionable earnings which, at that time, would fall to be taken into account in calculating the amount of benefits payable to or in respect of the individual under the arrangement if the individual became entitled to the present payment of benefits at that time (but subject to sub-paragraph (11)).
(11)If at that time the individual is absent from work in connection with pregnancy, maternity, paternity or adoption, the current amount of the relevant pensionable earnings at that time includes what would be likely to be included in that amount if the individual were not so absent.
16(1)This paragraph specifies the post-commencement earnings limit if the individual was on 5th April 2006 a person in relation to whom section 590C of ICTA (earnings cap) had effect in relation to any pension scheme under which the arrangement or any other arrangement related to the arrangement was made.
(2)The post-commencement earnings limit is the lesser of amount A and amount B.
(3)Amount A is 7.5% of the standard lifetime allowance when the first relevant event occurs.
(4)Amount B is the amount of the individual’s employment income from the employment to which the arrangement relates for the best period of 12 months during the appropriate three year period.
(5)The appropriate three year period is the period of three years ending with the time when the first relevant event occurs.
(6)A period of 12 months during the appropriate three year period is the best period of 12 months during the appropriate three year period if the amount of the individual’s employment income from the employment to which the arrangement relates is greater for that period of 12 months than for any other period of 12 months during the appropriate three year period.
(7)For the purposes of this paragraph and paragraph 17 the amount of the individual’s employment income includes, in relation to any time when the individual is absent from work in connection with pregnancy, maternity, paternity or adoption, what would be likely to be included in that amount if the individual were not so absent.
17(1)This paragraph specifies the post-commencement earnings limit in any other case.
(2)The post-commencement earnings limit is—
(a)if amount B is not greater than amount A, amount B, and
(b)otherwise, amount C.
(3)Amount A and amount B have the same meanings as in paragraph 16.
(4)Amount C is the greater of—
(b)amount D.
(5)Amount D is—
where ETY is the amount of the individual’s employment income from the employment to which the arrangement relates for the appropriate three year period (within the meaning of paragraph 16).
Pre-commencement pension credits
18(1)This paragraph makes provision for the operation of a lifetime allowance enhancement factor in relation to all benefit crystallisation events occurring in relation to an individual where before 6th April 2006 the individual has acquired rights under a pension scheme within paragraph 1 (1) by virtue of having become entitled to a pension credit.
(2)The lifetime allowance enhancement factor is the pre-commencement pension credit factor.
(3)The pre-commencement pension credit factor is—
IAPC is the amount which is the appropriate amount for the purposes of section 29 (1) of WRPA 1999 or Article 26 (1) of WRP(NI)O 1999 in relation to the pension credit, as increased by the percentage specified in sub-paragraph (4), and
(4)The percentage is the percentage by which the retail prices index for April 2006 is greater than that for the month in which the rights were acquired.
(5)This paragraph does not apply in the case of an individual if paragraph 7 (primary protection) applies in relation to the individual.
(6)This paragraph only applies if notice of intention to rely on this paragraph is given to the Inland Revenue in accordance with regulations made by the Board of Inland Revenue.
Individuals permitted to take pension before normal minimum pension age
19(1)This paragraph applies where a benefit crystallisation event occurs in relation to an individual who is a member of a registered pension scheme—
(a)in protected circumstances, and
(b)before the individual reaches normal minimum pension age.
(2)What would otherwise be the individual’s lifetime allowance is to be reduced by the relevant percentage.
(3)A benefit crystallisation event occurs in protected circumstances if—
(a)paragraph 22 or 23 (right to take pension before normal minimum pension age) applies to the individual and the pension scheme,
(b)the individual’s protected pension age (see paragraph 22(8) or 23(8)) is less than 50, and
(c)the pension scheme is not prescribed by regulations made by the Board of Inland Revenue.
(4)The relevant percentage is—
Y × 2.5
where Y is the number of complete years falling between the date on which the benefit crystallisation event occurs and the date on which the individual will reach normal minimum pension age.
(5)Sub-paragraph (6) applies where, after the occurrence in relation to the individual of a benefit crystallisation event in relation to which this paragraph has had effect, another benefit crystallisation event occurs in relation to the individual and the pension scheme.
(6)If the amount crystallised on the previous benefit crystallisation event exceeded the available amount of the individual’s lifetime allowance at the time of that benefit crystallisation event, section 219 (availability of individual’s lifetime allowance) applies as if the amount crystallised were the available amount of the individual’s lifetime allowance at that time.
20(1)This paragraph makes provision about an individual who, on 5th April 2006, has an actual (rather than a prospective) right to the payment of one or more relevant existing pensions.
(2)Section 219 (availability of individual’s lifetime allowance) applies as if, immediately before the first benefit crystallisation event occurring in relation to the individual—
(a)a benefit crystallisation event had occurred in relation to the individual, and
(b)the amount crystallised was the value of the individual’s pre-commencement pension rights immediately before the benefit crystallisation event.
(3)The value of the individual’s pre-commencement pension rights at any time is—
where (subject to sub-paragraph (4)) ARP is an amount equal to—
the annual rate at which the relevant existing pension is payable to the individual at that time, or
if more than one relevant existing pension is payable to the individual at that time, the aggregate of the annual rates at which each of the relevant existing pensions is so payable.
(4)In the case of unsecured pension or alternatively secured pension ARP is the maximum amount that may be paid in the unsecured pension year or alternatively secured pension year in which the time falls in accordance with pension rule 5 or pension rule 7 (see section 165).
(5)In this paragraph “relevant existing pension” has the same meaning as in paragraph 10(2); and paragraph 10(4) and (5) operates for the purposes of this paragraph for determining the annual rate at which a relevant existing pension is payable at any time (treating the references there to 5th April 2006 as to that time).
Part 3Pre-commencement benefit rights
Rights to take pension before normal minimum pension age
21(1)If paragraph 22 or 23 applies in relation to a registered pension scheme and a member of the pension scheme, this Part of this Act (except for section 218(6) and paragraph 19) has effect in relation to the member and the pension scheme as if references to normal minimum pension age were to the member’s protected pension age.
(2)Paragraphs 22(8) and 23(8) define the member’s protected pension age.
22(1)This paragraph applies in relation to a registered pension scheme and a member of the pension scheme if—
(a)the pension scheme is a protected pension scheme, and
(b)the retirement condition is met in relation to the member and the pension scheme.
(2)A pension scheme is a protected pension scheme if condition A or condition B is met.
(a)the pension scheme was within any of paragraphs (a) to (e) of paragraph 1(1), and
(b)the entitlement condition is met in relation to the member and the pension scheme.
(4)The entitlement condition is met in relation to the member and the pension scheme if—
(a)on 5th April 2006 the member had an actual or prospective right under the pension scheme to a pension from an age of less than 55,
(b)the rules of the pension scheme on 10th December 2003 included provision conferring such a right on some or all of the persons who were then members of the pension scheme, and
(c)such a right either was then conferred on the member or would have been had the member been a member of the scheme on that date.
(5)Condition B is met if the member is a member of the pension scheme as a result of a block transfer to it from a pension scheme (“the original pension scheme”) in relation to which condition A is met.
(6)A transfer is a block transfer if—
(a)it involves the transfer in a single transaction of all the sums and assets held for the purposes of, or representing accrued rights under, the arrangements under the pension scheme from which the transfer is made which relate to the member and at least one other member of that pension scheme, and
(b)before the transfer the member was not a member of the pension scheme to which the transfer is made.
(7)The retirement condition is met in relation to the member and the pension scheme if—
(a)the member becomes entitled to all the pensions payable to the member under arrangements under the pension scheme (to which the member did not have an actual entitlement on or before 5th April 2006) on the same date, and
(b)the member is not employed by a sponsoring employer after becoming entitled to a pension under the pension scheme.
(8)The member’s protected pension age is the age from which the member had an actual or prospective right to a pension under the protected pension scheme on 5th April 2006 (or, where condition B is met, under the original pension scheme on that date).
(9)But this paragraph does not have effect so as to give the member a protected pension age of more than 50 at any time before 6th April 2010.
23(1)This paragraph applies in relation to a registered pension scheme and a member of the pension scheme if—
(a)the pension scheme was within paragraph (f) or (g) of paragraph 1(1), and
(a)on 5th April 2006 the member had an actual or prospective right under the pension scheme to a pension from an age of less than 50, and
(b)the member’s occupation was on that date (or had been) one prescribed by regulations made by the Board of Inland Revenue.
(6)“Block transfer” has the same meaning as in paragraph 22(6).
(7)The retirement condition is met in relation to the member and the pension scheme if the member becomes entitled to all the pensions payable to the member under arrangements under the pension scheme (to which the member did not have an actual entitlement on or before 5th April 2006) on the same date.
Lump sum rights exceeding £375,000: primary and enhanced protection
24(1)If the lump sum condition and the registration condition are met in relation to an individual—
(a)paragraphs 27 to 29 (which modify Schedule 29 in relation to pension commencement lump sums), and
(b)paragraph 30 (which makes provision about scheme chargeable payments),
apply in relation to the individual.
(2)The lump sum condition is met if on 5th April 2006 the amount of an individual’s total lump sum rights exceeds £375,000 (25% of the standard lifetime allowance for the tax year 2006-07).
(3)Paragraph 25 defines the amount of an individual’s total lump sum rights on that date.
(4)The registration condition is met if either or both of the notice requirements is met.
(5)The first notice requirement is met if notice of intention to rely on paragraph 7 (primary protection) is given to the Inland Revenue in accordance with regulations under that paragraph in relation to the individual.
(6)The second notice requirement is met if notice of intention to rely on paragraph 12 (enhanced protection) is given to the Inland Revenue in accordance with regulations under that paragraph in relation to the individual.
25(1)The amount of an individual’s total lump sum rights on 5th April 2006 is—
VCPR is the value of the individual’s relevant crystallised pension rights on 5th April 2006, calculated in accordance with paragraph 10, and
VULSR is the value of the individual’s relevant uncrystallised lump sum rights on that date.
(2)The value of the individual’s relevant uncrystallised lump sum rights on 5th April 2006 is the aggregate value of the individual’s uncrystallised lump sum rights on that date under each relevant pension arrangement relating to the individual.
(3)An uncrystallised lump sum right is a right to a lump sum which on 5th April 2006 is prospective (rather than actual).
(4)An arrangement is a “relevant pension arrangement” if it is an arrangement under a pension scheme within paragraph 1(1).
(5)The value of the individual’s uncrystallised lump sum rights under an arrangement on 5th April 2006—
(a)in the case of an arrangement under a pension scheme falling within paragraph 1(1)(f), is 25% of the value of the funds held for the purposes of the arrangement on that date, and
(b)in the case of any other arrangement, is an amount calculated in accordance with sub-paragraph (6).
(6)The amount is the amount of any lump sum to which the individual would have been entitled under the arrangement on 5th April 2006 on the assumption that the individual became entitled to the present payment of a lump sum under the arrangement on that date.
(7)In calculating an amount in accordance with sub-paragraph (6) the valuation assumptions apply but as if the reference to such age (if any) as must have been reached to avoid any reduction in benefits on account of age in paragraph (a) of section 277 were to the relevant age; and for this purpose “the relevant age” is—
26(1)This paragraph applies if any of the individual’s uncrystallised lump sum rights on 5th April 2006 are rights under one or more arrangements under a pension scheme or schemes within paragraph 1(1)(a) to (d).
(2)The value of the individual’s uncrystallised lump sum rights on 5th April 2006 under the arrangement, or the aggregate of the values of the individual’s uncrystallised lump sum rights on 5th April 2006 under such of the arrangements as relate to a particular employment, is the lower of—
(a)the value, or the aggregate of the values, calculated under paragraph 25, and
(b)the maximum permitted lump sum.
(3)“The maximum permitted lump sum” means the maximum lump sum that could be paid to the individual on 5th April 2006 under the arrangement or arrangements if it or they were made under a pension scheme within paragraph 1(1)(a) without giving the Board of Inland Revenue grounds for withdrawing approval of the pension scheme under section 591B of ICTA.
(4)For the purposes of sub-paragraph (3) it is to be assumed—
(b)if the individual had not reached the lowest age at which a lump sum may be paid under a pension scheme within paragraph 1(1)(a) to a person in good health without giving the Board of Inland Revenue grounds for withdrawing the approval of the pension scheme, that that fact would not give the Board such grounds.
(5)Whether an arrangement relating to an individual relates to an employment is to be determined in accordance with paragraph 9(6).
27(1)If (and for so long as) paragraph 12 (enhanced protection) applies in relation to the individual, paragraph 2 of Schedule 29 applies in relation to the individual with the following modifications.
(2)If the value of the individual’s relevant uncrystallised lump sum rights on 5th April 2006 (calculated in accordance with paragraphs 25 and 26) was nil, the permitted maximum under paragraph 2 is nil.
(3)Otherwise, paragraph 2 applies as if for sub-paragraphs (5) to (8) there were substituted—
“(5)If sub-paragraph (2) does not apply, the permitted maximum is the applicable amount, calculated in accordance with paragraph 3.”
28(1)If paragraph 12 (enhanced protection) does not apply in relation to the individual, paragraph 2 of Schedule 29 applies in relation to the individual with the following modifications.
(3)Otherwise, paragraph 2 applies as if for sub-paragraphs (5) to (7) there were substituted—
“(5)If sub-paragraph (2) does not apply, the permitted maximum is the available portion of the member’s lump sum allowance.
(6)The available portion of the member’s lump sum allowance is—
VULSR - APCLS
VULSR is the value of the individual’s relevant uncrystallised lump sum rights on 5th April 2006 (calculated in accordance with paragraphs 25 and 26 of Schedule 36), as adjusted under sub-paragraph (6A), and
APCLS is the aggregate of the amounts of each pension commencement lump sum to which the individual has previously become entitled, as adjusted under sub-paragraph (7) (or, if the individual has not previously become entitled to a pension commencement lump sum, is nil).
(6A)The adjustment referred to in the definition of VULSR is the multiplication of the value of the individual’s relevant uncrystallised lump sum rights on 5th April 2006 by—
CSLA is the current standard lifetime allowance, and
FSLA is £1,500,000 (the standard lifetime allowance for the tax year 2006-07).
(7)The adjustment of the amount of a pension commencement lump sum to which the individual has previously become entitled referred to in the definition of APCLS is the multiplication of the amount by—
PSLA is the standard lifetime allowance at the time the individual became entitled to the lump sum.”
29(1)If (and for so long as) paragraph 12 (enhanced protection) applies in relation to the individual, paragraph 3 of Schedule 29 (applicable amount) applies with the following modifications.
(2)Paragraph 3 applies as if for sub-paragraphs (1) to (3) there were substituted—
“(1)Where the member becomes entitled to income withdrawal, the applicable amount is—
VULSR is the value of the individual’s relevant uncrystallised lump sum rights on 5th April 2006, calculated in accordance with paragraphs 25 and 26 of Schedule 36,
VUR is the value of the individual’s uncrystallised pension rights on 5th April 2006, calculated in accordance with paragraphs 8 and 9 of that Schedule,
LS is the lump sum paid, and
AD is the aggregate of the amount of the sums, and the market value of the assets, designated as available for the payment of unsecured pension on that occasion.
(2)For the purposes of sub-paragraph (1) there is to be deducted from the aggregate of the lump sum and the amount of the sums and the market value of the assets designated as available for the payment of unsecured pension so much (if any) of that amount as represents rights which are attributable to a disqualifying pension credit.
(3)Where the member becomes entitled to a lifetime annuity, the applicable amount is—
VULSR, VUR and LS have the same meaning as in sub-paragraph (1), and
APP is the annuity purchase price.”
(3)Paragraph 3 applies as if for sub-paragraphs (5) to (7) there were substituted—
“(5)There is to be deducted from the aggregate of the amount of the lump sum and the annuity purchase price—
(a)if the annuity is purchased (in whole or in part) by the application of sums or assets representing the whole or part of the member’s unsecured pension fund, the aggregate of the amount of those sums and the market value of those assets, and
(b)in any case, so much (if any) of the aggregate of the lump sum and the annuity purchase price as represents rights which are attributable to a disqualifying pension credit.
(6)Where the member becomes entitled to a scheme pension, the applicable amount is—
but subject to sub-paragraph (8).
AC is the amount crystallised by reason of the member becoming entitled to the pension (see section 216).”
30(1)Any part of a lump sum falling within paragraph 1 (1) of Schedule 29 which—
(a)under paragraph 1(2) of that Schedule is not a pension commencement lump sum (because the lump sum exceeds the permitted maximum), and
(b)is an unauthorised payment,
is to be treated as exempt from being scheme chargeable (under section 241(2)) if the condition in sub-paragraph (2) is met.
(2)The condition is that it would not have been an unauthorised payment if—
(a)paragraphs 27 and 29 (in the case of an individual in relation to whom paragraph 12 applies), or
(b)paragraph 28 (in the case of an individual in relation to whom paragraph 12 does not apply),
had not applied.
Entitlement to lump sums exceeding 25% of uncrystallised rights
31(1)If the pension condition is met in relation to an individual and a registered pension scheme which is a protected pension scheme, the provisions of Schedule 29 relating to pension commencement lump sums apply in relation to the individual and the pension scheme with the modifications specified in paragraph 34 (but subject to sub-paragraph (2)).
(2)Those provisions do not apply with those modifications if the lump sum condition and registration condition in paragraph 24 are met.
(3)The pension condition is that the individual becomes entitled to all the pensions payable to the individual under arrangements under the pension scheme (to which the individual did not have an actual entitlement on or before 5th April 2006) on the same date.
(4)A registered pension scheme is a protected pension scheme if condition A or condition B is met.
(5)Condition A is met if—
(b)on 5th April 2006 the lump sum percentage of the individual’s uncrystallised rights under the pension scheme exceeded 25%.
(6)The lump sum percentage of an individual’s uncrystallised pension rights under a pension scheme on 5th April 2006 is—
VULSR is the value of the individual’s uncrystallised lump sum rights under the pension scheme on 5th April 2006, calculated in accordance with paragraph 32, and
VUR is the value of the individual’s uncrystallised rights under the pension scheme on 5th April 2006, calculated in accordance with paragraph 33.
(7)Condition B is met if the individual is a member of the pension scheme as a result of a block transfer to it from a pension scheme (“the original pension scheme”) in relation to which condition A is met.
(8)“Block transfer” has the same meaning as in paragraph 22(6), but treating the references there to the member as references to the individual.
(9)Where a pension scheme is a protected pension scheme because condition B is met, Schedule 29 as modified by paragraph 34 applies as if the protected pension scheme were the same pension scheme as the original pension scheme.
32(1)Subject to sub-paragraph (2), the value of the individual’s uncrystallised lump sum rights under the pension scheme on 5th April 2006 is the aggregate of the value of the individual’s uncrystallised lump sum rights under each arrangement in respect of the individual under the pension scheme, calculated in accordance with paragraph 25(5), on that date.
(2)If the pension scheme is a relevant pension scheme, the value of the individual’s uncrystallised lump sum rights on 5th April 2006 under an arrangement—
(a)which relates to a particular employment, and
(b)in relation to which the excess lump sum condition is met (see sub-paragraph (5) or (6)),
(3)A pension scheme is a relevant pension scheme if it falls within paragraph 1(1)(a) to (d).
(4)Whether an arrangement relating to the individual relates to a particular employment is to be determined in accordance with paragraph 9(6).
(5)If no other arrangement relating to the individual under a relevant pension scheme relates to the employment to which the arrangement relates, the excess lump sum condition is met in relation to the arrangement if—
(a)the value of the individual’s uncrystallised lump sum rights under the arrangement calculated in accordance with paragraph 25(5), exceeds
(b)the amount arrived at in relation to the arrangement in accordance with paragraph 26.
(6)If one or more other arrangements relating to the individual under a relevant pension scheme or relevant pension schemes relates or relate to the employment to which the arrangement relates, the excess lump sum condition is met in relation to the arrangement if—
(a)the aggregate of the values of the individual’s uncrystallised lump sum rights under the arrangement and the other arrangement or arrangements, calculated in accordance with paragraph 25(5), exceeds
(b)the amount arrived at in relation to those arrangements in accordance with paragraph 26;
and the amount by which the aggregate of those values exceeds that amount is the “lump sum excess”.
(7)Where the excess lump sum condition is met by virtue of sub-paragraph (5), the value of the individual’s uncrystallised lump sum rights under the arrangement is the amount arrived at in accordance with paragraph 26.
(8)Where the excess lump sum condition is met by virtue of sub-paragraph (6), the value of the individual’s uncrystallised lump sum rights under the arrangement is the value of those rights calculated in accordance with paragraph 25(5), less the appropriate proportion of the lump sum excess.
(9)The appropriate proportion of the lump sum excess is—
V is the value of the individual’s uncrystallised lump sum rights under the arrangement, calculated in accordance with paragraph 25(5), and
AV is the aggregate of the values of the individual’s uncrystallised lump sum rights under the arrangement and the other arrangement or arrangements, calculated in accordance with paragraph 25(5).
33(1)Subject to sub-paragraph (2), the value of the individual’s uncrystallised rights under the pension scheme on 5th April 2006 is the aggregate of the value of the individual’s uncrystallised rights under each arrangement in respect of the individual under the pension scheme, calculated in accordance with paragraph 8(5).
(2)If the pension scheme is a relevant pension scheme, the value of the individual’s uncrystallised rights on 5th April 2006 under an arrangement—
(b)in relation to which the excess rights condition is met (see sub-paragraph (5) or (6)),
(5)If no other arrangement relating to the individual under a relevant pension scheme relates to the employment to which the arrangement relates, the excess rights condition is met in relation to the arrangement if—
(a)the value of the individual’s uncrystallised rights under the arrangement calculated in accordance with paragraph 8(5), exceeds
(b)the amount arrived at in relation to the arrangement in accordance with paragraph 9(3).
(6)If one or more other arrangements relating to the individual under a relevant pension scheme or relevant pension schemes relates or relate to the employment to which the arrangement relates, the excess rights condition is met in relation to the arrangement if—
(a)the aggregate of the values of the individual’s uncrystallised rights under the arrangement and the other arrangement or arrangements, calculated in accordance with paragraph 8(5), exceeds
(b)the amount arrived at in relation to those arrangements in accordance with paragraph 9(3);
and the amount by which the aggregate of those values exceeds that amount is the “rights excess”.
(7)Where the excess rights condition is met by virtue of sub-paragraph (5), the value of the individual’s uncrystallised rights under the arrangement is the amount arrived at in accordance with paragraph 9(3).
(8)Where the excess rights condition is met by virtue of sub-paragraph (6), the value of the individual’s uncrystallised rights under the arrangement is the value of those rights calculated in accordance with paragraph 8(5), less the appropriate proportion of the rights excess.
(9)The appropriate proportion of the rights excess is—
V is the value of the individual’s uncrystallised rights under the arrangement, calculated in accordance with paragraph 8(5), and
AV is the aggregate of the values of the individual’s uncrystallised rights under the arrangement and the other arrangement or arrangements, calculated in accordance with paragraph 8(5).
34(1)Schedule 29 applies with the following modifications.
(2)Paragraph 2 applies as if the reference in sub-paragraph (2) to the arrangement under which the member becomes entitled to the relevant pension were to the pension scheme and for sub-paragraphs (5) to (8) there were substituted—
“(5)If paragraph 2(2) does not apply and relevant benefit accrual has occurred under the pension scheme in relation to the individual after 5th April 2006, the permitted maximum is—
(6)If paragraph 2(2) does not apply and relevant benefit accrual has not occurred under the pension scheme in relation to the individual after 5th April 2006, the permitted maximum is—
VULSR is the value of the individual’s uncrystallised lump sum rights under the pension scheme on 5th April 2006, calculated in accordance with paragraph 32 of Schedule 36,
CSLA is the current standard lifetime allowance,
FSLA is £1,500,000 (the standard lifetime allowance for the tax year 2006-07), and
ALSA is the additional lump sum amount.
(7A)The additional lump sum amount is—
LS is the lump sum paid (but this is subject to sub-paragraph (7B)),
AC is the amount crystallised on the individual becoming entitled to the pension in connection with which the lump sum is paid (see section 216) (but this is subject to sub-paragraph (7B)), and
VUR is the value of the individual’s uncrystallised rights under the pension scheme on 5th April 2006, calculated in accordance with paragraph 33 of Schedule 36.
(7B)Any part of the lump sum and the amount crystallised which represents rights attributable to a disqualifying pension credit is to be disregarded.
(7C)Paragraph 13 of Schedule 36 specifies when relevant benefit accrual occurs in relation to an individual.”
(3)Omit paragraph 3 (applicable amount for pension commencement lump sums).
Winding-up lump sums paid by former approved superannuation funds
35(1)For the tax year 2006-07, Schedule 29 (authorised lump sums) applies in relation to former approved superannuation funds with the modifications specified in sub-paragraphs (2) and (3).
(2)Paragraph 10 (winding-up lump sums) applies as if the following were omitted—
(a)sub-paragraph (1)(c) and (d),
(b)sub-paragraph (2), and
(c)sub-paragraph (3).
(3)Paragraph 11 (lifetime allowance excess lump sums) applies as if at the end of paragraph (b) there were inserted “or a winding-up lump sum”.
(4)Section 636B of ITEPA 2003 (taxation of trivial commutation and winding-up lump sums) applies in relation to a winding-up lump sum paid by a former approved superannuation fund in the tax year 2006-07 as if—
(a)in subsection (2), after “equal to” there were inserted “75% of”, and
(5)“Former approved superannuation fund” has the meaning given by paragraph 1(3).
Right to payment of lump sum death benefit
36(1)This paragraph applies to a member of a registered pension scheme if on 5th April 2006—
(a)the pension scheme is within any of paragraphs (a) to (e) of paragraph 1(1),
(b)the member has an actual (rather than a prospective) right to a pension under an arrangement under the pension scheme, and
(c)under the arrangement a lump sum death benefit is payable if the member dies within the guarantee period.
(2)The guarantee period is the period of five years beginning with the day on which the member became entitled to the pension or, if later, the day on which the pension was first paid.
(3)If the member dies after having reached the age of 75 and before the end of the guarantee period—
(a)paragraph 14 of Schedule 29 (pension protection lump sum death benefit),
(b)paragraph 16 of that Schedule (annuity protection lump sum death benefit), and
(c)paragraph 17 of that Schedule (unsecured pension fund lump sum death benefit),
(4)Each of those paragraphs applies as if sub-paragraph (1)(a) were omitted.
(5)Paragraph 14 (1) applies as if paragraph (d) were omitted.
(6)Paragraph 14(2) applies as if the reference to the pension protection limit were to the transitional protection limit.
(7)Paragraph 16(2) applies as if the reference to the annuity protection limit were to the transitional protection limit.
(8)Paragraph 17(3) applies in relation to a lump sum falling within paragraph 17 (1) as if the reference to the permitted maximum were to the transitional protection limit.
(9)Section 206 (1) (special lump sum death benefits charge) does not apply to any pension protection lump sum death benefit, annuity protection lump sum death benefit or unsecured pension fund lump sum death benefit paid by virtue of sub-paragraphs (3) to (8).
(10)If the member dies before having reached the age of 75 and before the end of the guarantee period—
(a)section 206 (1) does not apply to so much of any pension protection lump sum death benefit, annuity protection lump sum death benefit or unsecured pension fund lump sum death benefit paid under the arrangement as does not exceed the transitional protection limit, and
(b)if the arrangement is a defined benefits arrangement, paragraph 14(1)(d) of Schedule 29 is to be treated as satisfied in relation to so much of the lump sum death benefit paid under the arrangement as does not exceed the transitional protection limit.
(11)The transitional protection limit is—
P - TPLS
P is the amount of pension to which (had the member lived) the member would have been entitled under the arrangement in respect of the period beginning with the day of the member’s death and ending with the last day of the guarantee period, and
TPLS is the amount of any pension protection lump sum death benefit, annuity protection lump sum death benefit or unsecured pension fund lump sum death benefit previously paid in respect of the pension.