INCOME TAX Part 1 Introductory Citation and commencement 1 1 These Regulations may be cited as the Pensions (Abolition of Lifetime Allowance Charge etc) (No. 3) Regulations 2024. 2 These Regulations come into force on 18th November 2024. 3 The amendments made by these Regulations have effect for the tax year 2024-25 and subsequent tax years. Part 2 Amendments of primary legislation Schedule 29 to FA 2004 2 1 Schedule 29 to FA 2004 (registered pension schemes: authorised lump sums - supplementary) is amended as follows. 2 In paragraph 2C (definition of “the applicable amount” in certain cases)— a in sub-paragraph (1)— i in the opening words, after “relevant pension is” insert “a scheme pension under” ; ii in paragraph (a) omit “a scheme pension under”; b in sub-paragraph (2)— i in the opening words, for “sub-paragraph (3)” substitute “sub-paragraphs (3) and (4)” ; ii in the formula, in the numerator omit “- D”; iii in the definition of B, for “revaluation” substitute “valuation” ; iv omit the definition of D; c in sub-paragraph (3), for “subsection” substitute “sub-paragraph” ; d after sub-paragraph (3) insert— 4 For the purposes of sub-paragraph (2), any part of what would otherwise be A or C which represents rights attributable to a disqualifying pension credit is to be disregarded. . 3 For paragraph 8 (trivial commutation lump sum: value of member’s relevant crystallised pension rights on nominated date) substitute— 8 1 The value of the member’s relevant crystallised pension rights on the nominated date is the aggregate of— a the value of the member’s relevant crystallised pension rights on 5th April 2006, calculated in accordance with paragraph 10 of Schedule 36 (as if the member were the individual mentioned there), and b if, at any time in the period beginning with 6th April 2006 and ending with the nominated date, the member has become entitled under a registered pension scheme to income withdrawal, a lifetime annuity or a scheme pension, the relevant capital amount, and c if, at any time in the period beginning with 6th April 2006 and ending with the nominated date, the member has been paid a lump sum under a registered pension scheme, the amount of the lump sum. 2 In sub-paragraph (1) (b) “ the relevant capital amount ” means— a in relation to income withdrawal, the scheme pension capital value, as determined under paragraph 2A(3) and (4) ; b in relation to a lifetime annuity, the annuity purchase price, as determined under paragraph 2B(3) and (4); c in relation to a scheme pension under a defined benefits arrangement or a collective money purchase arrangement, the amount given by the formula— B × C where B and C have the same meaning as they have for the purposes of paragraph 2C(2); d in relation to a scheme pension under a money purchase arrangement that is not a collective money purchase arrangement, the scheme pension purchase price, as determined under paragraph 2D(3) and (4). . Schedule 36 to FA 2004 3 1 Schedule 36 to FA 2004 (transitional provision and saving) is amended as follows. 2 In paragraph 20 (pre-commencement pensions), after sub-paragraph (2) insert— 2A Section 244IC (availability of member’s overseas transfer allowance) applies as if, immediately before the first transfer of the kind mentioned in section 244IA(1)(a) made in relation to the member on or after 6th April 2024— a a transfer of that kind had been made in relation to the member, and b the transferred value of the transfer was an amount equal to 25% of the value of the member’s pre-commencement pension rights immediately before the transfer. . 3 In paragraph 20A (pension credits from previously crystallised rights)— a for sub-paragraph (5) substitute— 5 The pension credit factor is— A S L A where— A is the post-commencement pension in payment portion of 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; SLA is the standard lifetime allowance for the tax year in which the rights mentioned in sub-paragraph (1)(a) were acquired. ; b after sub-paragraph (9) insert— 10 A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year. . 4 In paragraph 20C (non-residence: money purchase arrangements)— a in sub-paragraph (4)— i in the formula, for “£1,000,000” substitute “SLA” ; ii after the definition of B insert— SLA is the standard lifetime allowance for the tax year in which that part of that period ended. ; b in sub-paragraph (7)— i in the formula, for “£1,000,000” substitute “SLA” ; ii after the definition of C insert— SLA is the standard lifetime allowance for the tax year in which that part of that period ended. ; c after sub-paragraph (7) insert— 8 A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year. . 5 In paragraph 20D (non-residence: other arrangements)— a in sub-paragraph (4)— i in the formula, for “£1,000,000” substitute “SLA” ; ii after the definition of E insert— SLA is the standard lifetime allowance for the tax year in which that part of that period ended. ; b after sub-paragraph (7) insert— 8 A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year. . 6 In paragraph 20E (transfers from recognised overseas pension scheme: general)— a in sub-paragraph (6)— i in the formula, for “£1,000,000” substitute “SLA” ; ii after the definition of B insert— SLA is the standard lifetime allowance for the tax year in which the transfer took place. ; b after sub-paragraph (10) insert— 11 A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year. . 7 In paragraph 31 (entitlement to lump sums exceeding 25% of uncrystallised rights)— a in sub-paragraph (1), for “paragraph 34 (but subject to sub-paragraph (2))” substitute “paragraph 34(2) (but subject to sub-paragraph (2) of this paragraph and to paragraph 34(3))” ; b after sub-paragraph (1) insert— 1A For provision about the tax treatment of a pension commencement lump sum the permitted maximum of which is determined under paragraph 2 of Schedule 29 as modified by paragraph 34 (3) , see paragraph 34A . ; c in sub-paragraph (3)— i the words after “The pension condition is that” become paragraph (a); ii after that paragraph insert “, and b the individual does not become entitled to more than one pension commencement lump sum in connection with becoming entitled to those pensions. . 8 For paragraph 34 substitute— 34 1 Sub-paragraphs (2) and (3) specify the modifications of the provisions of Schedule 29 relating to pension commencement lump sums that apply in accordance with paragraph 31(1) (entitlement to lump sums exceeding 25% of uncrystallised rights). 2 Schedule 29 has effect as if, in paragraph 1(1)(b) (pension commencement lump sum), the words “all or part of the member’s lump sum allowance is available, and” were omitted. 3 Subject to sub-paragraph (4) , Schedule 29 has effect as if, for paragraph 2 (definition of “the permitted maximum”), there were substituted— 2 1 In paragraph 1 “ the permitted maximum ”, in relation to a lump sum, means— A × 1 . 2 + B where— A is the value of the member’s uncrystallised lump sum rights under the pension scheme on 5th April 2006, calculated in accordance with paragraph 32 of Schedule 36; B is the additional lump sum amount (see sub-paragraphs (2) to (6) below). 2 In sub-paragraph (1) , “ the additional lump sum amount ” means— C + D - E × F 1 , 500 , 000 4 where— C is the lump sum paid; D is the relevant capital amount in relation to the relevant pension (see sub-paragraph (6) ); E is the value of the member’s uncrystallised rights under the pension scheme on 5th April 2006, calculated in accordance with paragraph 33 of Schedule 36; F is the member’s lump sum and death benefit allowance. 3 For the purposes of sub-paragraph (2) , any part of what would otherwise be C which represents rights attributable to a disqualifying pension credit is to be disregarded. 4 In a case in which the lump sum is paid in connection with the member becoming entitled to more than one relevant pension (within the meaning given by paragraph 1(3)), the reference in the definition of D in sub-paragraph (2) to the relevant capital amount in relation to the relevant pension is to the sum of the relevant capital amounts in relation to each of the relevant pensions. 5 If the amount given by the formula in sub-paragraph (2) is negative, the additional lump sum amount is nil. 6 In sub-paragraph (2) “ the relevant capital amount ” means— a in a case in which the relevant pension is income withdrawal, the scheme pension capital value, as determined under paragraph 2A(3) and (4); b in a case in which the relevant pension is a lifetime annuity, the annuity purchase price, as determined under paragraph 2B(3) and (4); c in a case in which the relevant pension is a scheme pension under a defined benefits arrangement or a collective money purchase scheme, the amount given by the formula— B × C where B and C have the same meaning as they have for the purposes of paragraph 2C(2); d in a case in which the relevant pension is a scheme pension under a money purchase arrangement that is not a collective money purchase arrangement, the scheme pension purchase price, as determined under paragraph 2D(3) and (4). . 4 If, in any case, the permitted maximum of a lump sum that is determined under paragraph 2 of Schedule 29 as modified by sub-paragraph (3) of this paragraph is lower than it would have been disregarding the modification, the modification is to be disregarded. . 9 After paragraph 34 (but before the italic heading after it) insert— 34A 1 Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) applies in relation to a paragraph 34 pension commencement lump sum as if— a for section 637A (pension commencement lump sums), there were substituted— Pension commencement lump sums 637A 1 Subject to subsection (2) , no liability to income tax arises on a pension commencement lump sum paid under a registered pension scheme. 2 If— a a pension commencement lump sum is paid under a registered pension scheme, and b the lump sum exceeds the amount of the member’s lump sum and death benefit allowance that is available on the member becoming entitled to it, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme. ; b in section 637Q (availability of individual’s lump sum allowance), for subsection (6) there were substituted— 6 In subsection (5) “ non-taxable amount ”, in relation to the individual becoming entitled to a pension commencement lump sum, means the lower of— a so much (if any) of the lump sum as is not subject to the charge to income tax by virtue of any provision of this Chapter, and b the amount given by the formula— C + D 4 where C and D have the same meaning as in sub-paragraph (3) of paragraph 2 of Schedule 29 to FA 2004 (definition of “the permitted maximum”) as that paragraph applies in relation to the lump sum. 6A In subsection (5) “ non-taxable amount ”, in relation to the individual becoming entitled to an uncrystallised funds pension lump sum, means so much (if any) of the lump sum as is not subject to the charge to income tax by virtue of any provision of this Chapter. . 2 In sub-paragraph (1) “ paragraph 34 pension commencement lump sum ” means a pension commencement lump sum the permitted maximum of which is determined under paragraph 2 of Schedule 29 as modified by paragraph 34 (3) . . Part 3 Amendments of subordinate legislation Taxation of Pension Schemes (Transitional Provisions) Order 2006 4 1 The Taxation of Pension Schemes (Transitional Provisions) Order 2006 is amended as follows. 2 In article 21 (transfers and entitlement to lump sums exceeding 25% of uncrystallised rights), in paragraph (1), for “Articles 22 and 23 apply” substitute “Article 23 applies” . 3 Omit article 22 (modification of paragraph 31 of Schedule 36). 4 For article 23 (modification of paragraph 34 of Schedule 36) substitute— Modification of paragraph 34 of Schedule 36 23 1 Paragraph (2) below specifies modifications of paragraph 34 of Schedule 36 (entitlement to lump sums exceeding 25% of uncrystallised rights: definition of “ permitted maximum ” in relation to a pension commencement lump sum) that apply in the circumstances mentioned in article 21. 2 In sub-paragraph (3) , for sub-paragraph (1) of the modified paragraph 2 of Schedule 29, substitute— 1 In paragraph 1 “ the permitted maximum ”, in relation to a lump sum, means— A × 1 . 2 + B - T V 4 where— A is the value of the member’s uncrystallised lump sum rights under the pension scheme on 5th April 2006, calculated in accordance with paragraph 32 of Schedule 36; B is the additional lump sum amount (see sub-paragraphs (2) to (5) ); TV is the value of all sums and assets held for the purposes of, or representing accrued rights under, the pension scheme that have been transferred from it as mentioned in article 21(1)(b) of the Taxation of Pension Schemes (Transitional Provisions) Order 2006. . . 5 In article 23ZA (pension commencement lump sums where no pension is paid before death)— a in paragraph (2), in the substitute paragraph 31(3) of Schedule 36 to FA 2004— i the words after “The pension condition is that, the scheme administrator considers that, had the individual not died” become paragraph (a); ii after that paragraph insert , and b the individual would not have become entitled to more than one pension commencement lump sum in connection with becoming entitled to those pensions. ; b for paragraph (3) substitute— 3 In determining the amount of the additional lump sum amount under paragraph 2(2) of Schedule 29, as modified by paragraph 34 (3) of Schedule 36 (entitlement to lump sums exceeding 25% of uncrystallised rights: definition of “ permitted maximum ” in relation to a pension commencement lump sum), it is to be assumed that the member became entitled immediately before death to the present payment of the relevant pension in connection with which the lump sum in question is paid. . 6 In article 23ZD (individual dies before becoming entitled to any of the pensions)— a in paragraph (2), in the substitute paragraph 31(3) of Schedule 36 to FA 2004— i the words after “The pension condition is that, the scheme administrator considers that, had the individual not died” become paragraph (a); ii after that paragraph insert , and b the individual would not have become entitled to more than one pension commencement lump sum in connection with becoming entitled to those pensions. ; b for paragraph (3) substitute— 3 In determining the amount of the additional lump sum amount under paragraph 2(2) of Schedule 29, as modified by paragraph 34 (3) of Schedule 36 (entitlement to lump sums exceeding 25% of uncrystallised rights: definition of “ permitted maximum ” in relation to a pension commencement lump sum), it is to be assumed that the member became entitled immediately before death to the present payment of each of the pensions in connection with which the lump sum in question is paid. . 7 In article 23ZE (individual dies after becoming entitled to at least one but not all of the pensions)— a in paragraph (3), in the substitute paragraph 31(3) of Schedule 36 to FA 2004— i the words after “The pension condition is that, the scheme administrator considers that, had the individual not died” become paragraph (a); ii after that paragraph insert , and b the individual would not have become entitled to more than one pension commencement lump sum in connection with becoming entitled to those pensions. ; b for paragraph (4) substitute— 4 In determining the amount of the additional lump sum amount under paragraph 2(2) of Schedule 29, as modified by paragraph 34 (3) of Schedule 36 (entitlement to lump sums exceeding 25% of uncrystallised rights: definition of “ permitted maximum ” in relation to a pension commencement lump sum), it is to be assumed that the member became entitled immediately before death to the present payment of each of the pensions in connection with which the lump sum in question is paid. . 8 In article 23D (modifications of Schedule 36 to FA 2004), in paragraph (2), in the substitute paragraph 31(3) of Schedule 36 to FA 2004, for paragraph (a) substitute— a the individual— i 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, and ii does not become entitled to more than one pension commencement lump sum in connection with becoming entitled to those pensions; or . 9 In article 25CA (circumstance A: tax treatment of stand-alone lump sums), in paragraph (2), in the inserted section 637GA of ITEPA 2003 (stand-alone lump sums)— a in subsection (3)(b), for “immediately before the individual becomes” substitute “on the individual becoming” ; b at the end insert— 4 In determining the amount of the individual’s lump sum and death benefit allowance that is available on the individual becoming entitled to the lump sum, paragraph 20H of Schedule 36 of FA 2004 (individual’s enhanced lump sum and death benefit allowance) has effect as if, in sub-paragraph (2) of that paragraph, B (the aggregate of the lump sum and death benefit allowance enhancement factors operating in relation to the individual) were zero. . 10 In article 25CC (circumstance C: tax treatment of stand-alone lump sums), in paragraph (2), in the inserted section 637GA of ITEPA 2003 (stand-alone lump sums)— a in subsection (3)(b), for “immediately before the individual becomes” substitute “on the individual becoming” ; b at the end insert— 4 In determining the amount of the individual’s lump sum and death benefit allowance that is available on the individual becoming entitled to the lump sum, paragraph 20H of Schedule 36 of FA 2004 (individual’s enhanced lump sum and death benefit allowance) has effect as if, in sub-paragraph (2) of that paragraph, B (the aggregate of the lump sum and death benefit allowance enhancement factors operating in relation to the individual) were zero. . The Registered Pension Schemes (Authorised Payments) Regulations 2009 5 1 The Registered Pension Schemes (Authorised Payments) Regulations 2009 are amended as follows. 2 In regulation 5 (prescribed payments and taxation), in the opening words, for “Part 4” substitute “any of regulations 17 to 19” . 3 After that regulation insert— 5ZA A payment by a registered pension scheme that is described in regulation 19A or 19B of these Regulations— a is a payment of a prescribed description for the purposes of section 164(1)(f) of the Finance Act 2004; b shall be treated for the purposes of Part 9 of ITEPA 2003 as pension that— i is paid to the recipient under a registered pension scheme; and ii accrues in the tax year in which the payment is made. . 4 After regulation 19 (commencement lump sums paid after death) insert— Commencement lump sums paid in reliance on inaccurate transitional tax-free amount certificate 19A 1 A payment of the overpaid portion of a lump sum the whole of which is intended to represent a pension commencement lump sum, where the amount of the lump sum paid is calculated by reference to an amount specified on a transitional tax-free amount certificate. 2 In paragraph (1), “ the overpaid portion ”, in relation to a lump sum, means so much of it as— a was not a pension commencement lump sum, but b would have been a pension commencement lump sum if the amount specified on the certificate had been accurate. Other lump sums paid in reliance on inaccurate transitional tax-free amount certificate 19B A payment of a lump sum which is intended to represent a trivial commutation lump sum or a winding-up lump sum, where— a the scheme administrator or insurance company acted in reliance on an amount specified on a transitional tax-free amount certificate when deciding that the lump sum was a lump sum of that description, b the lump sum was not a lump sum of that description, and c the lump sum would have been a lump sum of that description if the amount specified on the certificate had been accurate. . Part 4 Transitional provision Treatment of trivial commutation lump sums paid during pre-commencement period 6 1 This regulation applies where— a during the pre-commencement period, a member of a registered pension scheme becomes entitled to, and is paid, a lump sum under the scheme, and b disregarding the amendments made by these Regulations, the lump sum would be a trivial commutation lump sum . 2 For the purposes of determining whether the lump sum is a trivial commutation lump sum, the amendments made by these Regulations are to be disregarded (and accordingly the lump sum is to be treated as a trivial commutation lump sum). 3 In this regulation “ the pre-commencement period ” means the period beginning with 6th April 2024 and ending with the day before the day on which these Regulations come into force. Jeff Smith Vicky Foxcroft Two of the Lords Commissioners of His Majesty's Treasury 14th November 2024