C1C7C9C10C12C15C16C17C19C28C31C32C33C34C35Part 4Pension schemes etc

Annotations:
Modifications etc. (not altering text)
C16

Pt. 4 modified (1.7.2008) (N.I.) (with effect in accordance with reg. 1 of the amending Rule) by The Health and Social Care (Pension Scheme) Regulations (Northern Ireland) 2008 (S.R. 2008/256), regs. 1, 124(1) (with regs. 134, 258)

C19

Pt. 4 applied (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 18

C28

Pt. 4 modified (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(3)

C31

Pt. 4 applied (with modifications) (with application in accordance with Sch. 22 para. 1 of the amending Act) by Finance Act 2013 (c. 29), Sch. 22 para. 1(2)

C32

Pt. 4 modified (17.7.2014) by Finance Act 2014 (c. 26), Sch. 6 para. 1(2)(3)

C33

Pt. 4: power to amend conferred (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), s. 4(3)

C34

Pt. 4 modified (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 1

C35

Pt. 4 modified (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 9(2)

C28Chapter 3Payments by registered pension schemes

Authorised member payments

I1C6164Authorised member payments

C36C37F131

The only payments a registered pension scheme is authorised to make to or in respect of a F1person who is or has been a member of the pension scheme are—

a

pensions permitted by the pension rules or the pension death benefit rules F2to be paid to or in respect of a member (see sections 165 and 167),

b

lump sums permitted by the lump sum rule or the lump sum death benefit rule F3to be paid to or in respect of a member (see sections 166 and 168),

c

recognised transfers (see section 169),

d

scheme administration member payments (see section 171),

e

payments pursuant to a pension sharing order or provision, and

f

payments of a description prescribed by regulations made by the Board of Inland Revenue.

F142

Regulations under subsection (1)(f) may—

a

provide that for the purposes of Part 9 of ITEPA 2003 all or part of a prescribed payment is to be treated as pension under a registered pension scheme, or as a lump sum of a prescribed description,

b

provide that all or part of a prescribed payment is subject to the short service refund lump sum chargeF69... or the special lump sum death benefits charge,

c

provide that a prescribed event in relation to a prescribed payment is to be treated F83as a relevant benefit crystallisation event for the purposes of section 637Q or 637S of ITEPA 2003 (availability of individual’s lump sum allowance and lump sum and death benefit allowance),

F21d

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

and “prescribed” means prescribed in regulations under subsection (1)(f).

F473

The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision—

a

having the effect that the making of a prescribed authorised payment does not (directly or indirectly) result in an individual first flexibly accessing pension rights for the purposes of sections 227B to 227F,

b

having the effect that the making of a prescribed authorised payment is not a relevant withdrawal for the purposes of section 579CA of ITEPA 2003, and

c

having the effect that the making of a prescribed payment by a pension scheme that is not a registered pension scheme, where the payment would be an authorised payment if the scheme were a registered pension scheme, is not a relevant withdrawal for the purposes of section 576A of ITEPA 2003.

4

In subsection (3)—

  • “authorised payment” means a payment specified in subsection (1), and

  • “prescribed” means prescribed in regulations under subsection (3).

I2C13C20C24C26C29165Pension rules

C21

These are the rules relating to the payment of pensions by a registered pension scheme to a member of the pension scheme (“the pension rules”).

  • Pension rule 1

    No payment of pension may be made before the day on which the member reaches normal minimum pension age, unless the ill-health condition was met immediately before the member became entitled to a pension under the pension scheme.

  • Pension rule 2

    If the member dies before the end of the period of ten years beginning with the day on which the member became entitled to a scheme pension F10or an annuity, F49and if in the case of an annuity that day was before 6 April 2015, payment of the scheme pension F11or annuity may continue to be made (to any person) until the end of that period.

    F50If the member becomes entitled to an annuity on or after 6 April 2015 and the annuity is payable until the later of the member's death and the end of a term certain, payment of the annuity may continue to be made (to any person) until the end of that term.

    F51Except as provided by the preceding provisions of this rule, no payment of the member’s pension may be made after the member’s death.

  • Pension rule 3

    No payment of pension other than a scheme pension may be made in respect of a defined benefits arrangement F78or a collective money purchase arrangement.

  • Pension rule 4

    F29No payment of pension other than—

    1. a

      a scheme pension,

    2. b

      a lifetime annuity, or

    3. c

      F30drawdown pension

    may be made in respect of a money purchase arrangement F79that is not a collective money purchase arrangement; but a scheme pension may only be paid if the member had an opportunity to select a lifetime annuity instead.

  • F31Pension rule 5

    The total amount of drawdown pension paid in each drawdown pension year F48from, or under a short-term annuity purchased using sums or assets out of, the member's drawdown pension fund in respect of a money purchase arrangement must not exceed F44150% of the basis amount for the drawdown pension .

  • F32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  • F32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

In this Part “pension”, in relation to a registered pension scheme, includes—

a

an annuity, and

b

income withdrawal.

3

For the purposes of this Part, a person becomes entitled to a pension under a registered pension scheme—

a

in the case of income withdrawal under the pension scheme, whenever sums or assets held for the purposes of an arrangement under the pension scheme are designated as available for the payment of F33drawdown pension, and

b

in any other case, when the person first acquires an actual (rather than a prospective) right to receive the pension

F4and, for this purpose, the abatement of a scheme pension under a public service pension scheme is not to be taken to affect the right to receive it.

F653A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F653B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

Part 1 of Schedule 28 gives the meaning of expressions used in the pension rules.

I3C8166Lump sum rule

C51

This is the rule relating to the payment of lump sums by a registered pension scheme to a member of the pension scheme (“the lump sum rule”).

Lump sum rule

No lump sum may be paid other than—

a

a pension commencement lump sum,

F84aa

a pension commencement excess lump sum,

b

a serious ill-health lump sum,

F53ba

an uncrystallised funds pension lump sum,

c

a short service refund lump sum,

d

a refund of excess contributions lump sum,

e

a trivial commutation lump sum F85, or

f

a winding-up lump sum, F43...

F86g

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F87h

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C182

For the purposes of this Part, a person becomes entitled to a lump sum under a registered pension scheme—

F88za

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C23C22a

in the case of F89a pension commencement lump sum or a pension commencement excess lump sum, immediately before the person becomes entitled to the pension in connection with which it is paid F5(or, if the person dies before becoming entitled to the pension in connection with which it was anticipated it would be paid, immediately before death),

F52aa

in the case of an uncrystallised funds pension lump sum, immediately before it is paid, and

b

in any other case, when the person acquires an actual (rather than a prospective) right to receive the lump sum.

3

Part 1 of Schedule 29 gives the meaning of expressions used in the lump sum rule.

4

Schedule 36 contains (in Part 3) transitional provisions about lump sums.

F425

The Commissioners for Her Majesty's Revenue and Customs may by regulations amend Part 1 of Schedule 29, or Part 3 of Schedule 36, in connection with cases involving a lump sum within subsection (6).

6

A lump sum is within this subsection if—

a

the sum is paid on or after 19 September 2013 and before 6 April 2015, or

b

the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled.

7

The provision that may be made under subsection (5) includes provision altering the effect of amendments made by the Finance Act 2014.

I4C14C21C28C27C25C30167C28Pension death benefit rules

C31

These are the rules relating to the payment of pension death benefits by a registered pension scheme in respect of a member of the pension scheme (“the pension death benefit rules”).

  • Pension death benefit rule 1

    No payment of pension death benefit may be made otherwise than to a dependantF55, or nominee or successor, of the member.

  • Pension death benefit rule 2

    No payment of pension death benefit other than a dependants' scheme pension may be made in respect of a defined benefits arrangement F80or a collective money purchase arrangement.

  • Pension death benefit rule 3

    F24No payment of pension death benefit other than—

    1. a

      a dependants' scheme pension,

    2. b

      a dependants' annuity, or

    3. c

      F25dependants’ drawdown pension,

    may be made to F26a dependant in respect of a money purchase arrangement F81that is not a collective money purchase arrangement; but a dependants' scheme pension may only be paid if the member or dependant had an opportunity to select a dependants' annuity instead.

  • F56Pension death benefit rule 3A

    No payment of pension death benefit, other than F63a nominees' annuity in respect of a money purchase arrangement or nominees' drawdown pension in respect of a money purchase arrangement, may be made to a nominee of the member.

  • F56Pension death benefit rule 3B

    No payment of pension death benefit, other than F64a successors' annuity in respect of a money purchase arrangement or successors' drawdown pension in respect of a money purchase arrangement, may be made to a successor of the member.

  • F27Pension death benefit rule 4

    The total amount of dependants’ drawdown pension paid to a dependant in each drawdown pension year F54from, or under a dependants' short-term annuity purchased using sums or assets out of, the dependant's drawdown pension fund in respect of a money purchase arrangement must not exceed F45150% of the basis amount for the drawdown pension year.

    F66...

  • F28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  • F28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F571A

For the purposes of this Part, a person becomes entitled to dependants' income withdrawal, nominees' income withdrawal or successors' income withdrawal under a registered pension scheme whenever sums or assets held for the purposes of an arrangement under the pension scheme are designated as available for the payment of (as the case may be) dependants' drawdown pension, nominees' drawdown pension or successors' drawdown pension.

2

F6In this part “pension death benefit” means a pension payable on the death of the member (other than a member’s pension payable after the member’s death under pension rule 2: see section 165)F58, or a pension payable in respect of the member on the subsequent death of a dependant, nominee or successor of the member.

F672A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F672B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

Part 2 of Schedule 28 gives the meaning of expressions used in the pension death benefit rules.

I5C11168Lump sum death benefit rule

C41

This is the rule relating to the payment of lump sum death benefits by a registered pension scheme in respect of a member of the pension scheme (“the lump sum death benefit rule”).

Lump sum death benefit rule

No lump sum death benefit may be paid other than—

a

a defined benefits lump sum death benefit,

b

a pension protection lump sum death benefit,

c

an uncrystallised funds lump sum death benefit,

d

an annuity protection lump sum death benefit,

F34e

a drawdown pension fund lump sum death benefit,

F59ea

a flexi-access drawdown fund lump sum death benefit,

f

a charity lump sum death benefit F90, or

F12g

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

h

a trivial commutation lump sum death benefit, F91...

F91i

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

In this Part “lump sum death benefit” means a lump sum payable on the death of the member F68, or a lump sum payable in respect of the member on the subsequent death of a dependant, nominee or successor of the member.

3

Part 2 of Schedule 29 gives the meaning of expressions used in the lump sum death benefit rule.

4

Schedule 36 contains (in Part 3) transitional provision about lump sum death benefits.

I6169Recognised transfers

1

A “recognised transfer” is a transfer of sums or assets held for the purposes of, or representing accrued rights under, a registered pension scheme so as to become held for the purposes of, or to represent rights under—

a

another registered pension scheme, or

b

a qualifying recognised overseas pension scheme,

in connection with a member of that pension scheme.

F71A

A transfer of sums or assets held for the purposes of, or representing accrued rights under, a registered pension scheme to an insurance company is to be treated as a recognised transfer if the sums or assets had been applied by the pension scheme towards the provision of a scheme pension or a dependants' scheme pension (but subject to regulations under subsections (1B) and (1C)).

1B

The Board of Inland Revenue may by regulations provide that, where any of the sums or assets transferred represent rights in respect of a scheme pension to which a member of a registered pension scheme has become entitled (“the original scheme pension”)—

a

the transfer is not a recognised transfer unless those sums and assets are, after the transfer, applied towards the provision of a scheme pension (a “new scheme pension”), and

b

if they are so applied, the new scheme pension is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original scheme pension.

1C

The Board of Inland Revenue may by regulations provide that, where any of the sums or assets transferred represent rights in respect of a dependants' scheme pension to which a dependant of a member of a registered pension scheme has become entitled in respect of the member (“the original dependants' scheme pension”)—

a

the transfer is not a recognised transfer unless those sums and assets are, after the transfer, applied towards the provision of a dependants' scheme pension (a “new dependants' scheme pension”), and

b

if they are so applied, the new dependants' scheme pension is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original dependants' scheme pension.

1D

The Board of Inland Revenue may by regulations provide that, where any of the sums or assets transferred represent—

a

a F22member's drawdown pension fund or dependant's drawdown pension fund, F23... F60or

aa

a member's flexi-access drawdown fund or dependant's flexi-access drawdown fund,F61or

ab

a nominee's flexi-access drawdown fund, or

ac

a successor's flexi-access drawdown fund,

F23b

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

under an arrangement (“the old arrangement”), the transfer is not a recognised transfer unless all of those sums and assets become held under an arrangement under which no other sums or assets are held (“the new arrangement”).

1E

If regulations so provide they may make in relation to cases in which the sums and assets become so held provision as to the treatment for the purposes of any provision of this Part of—

a

the sums and assets transferred, and

b

the new arrangement,

including provision for treating the sums and assets transferred as remaining, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, sums and assets held under the old arrangement.

F821F

The Commissioners for His Majesty’s Revenue and Customs may by regulations make provision as to the treatment for the purposes of any provision of this Part of a CMP-derived drawdown pension.

1G

The provision that may be made under subsection (1F) includes provision for treating sums or assets held for the purposes of a CMP-derived drawdown pension as remaining, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, held for the purposes of the collective money purchase arrangement under the pension scheme from which they were transferred.

2

For the purposes of this Part a recognised overseas pension scheme is a qualifying recognised overseas pension scheme if—

a

the scheme manager has given to the Inland Revenue notification that it is a recognised overseas pension scheme and has provided any such evidence that it is a recognised overseas pension scheme as the Inland Revenue may require,

b

the scheme manager has undertaken to the Inland Revenue to inform the Inland Revenue if it ceases to be a recognised overseas pension scheme,

F77ba

the scheme manager has confirmed to an officer of Revenue and Customs that the scheme manager understands the scheme manager's potential liability to overseas transfer charge and has undertaken to such an officer to operate the charge including by meeting the scheme manager's liabilities to the charge,

c

the scheme manager has undertaken to the Inland Revenue to comply with F37any requirements imposed under subsection (4), and

d

the recognised overseas pension scheme is not excluded from being a qualifying recognised overseas pension scheme by subsection (5).

F702A

Regulations may make provision as to—

a

information that is to be included in, or is to accompany, a notification under subsection (2)(a);

b

the way and form in which such a notification, or any required information or evidence, is to be given or provided.

3

In this Part “scheme manager”, in relation to a pension scheme, means the person or persons administering, or responsible for the management of, the pension scheme.

F354

Regulations may require the scheme manager of a QROPS or former QROPS to—

a

give the Commissioners information of a prescribed description,

b

give the Commissioners such evidence as they may require of a prescribed matter,

F62ba

give information of a prescribed description to the scheme manager of a QROPS or former QROPS,

bb

give information of a prescribed description to the scheme administrator of a registered pension scheme,

bc

give information of a prescribed description to a member, or former member, of the QROPS or former QROPS, and

c

give a prescribed authority, in prescribed circumstances, information of a prescribed description.

F714ZA

Regulations may require a member, or former member, of a QROPS or former QROPS to give information of a prescribed description to the scheme manager of a QROPS or former QROPS.

4A

Regulations under subsection (4) F76or (4ZA) may make provision as to—

a

the way and form in which information or evidence is to be given, and

b

the times or intervals at which information or evidence is to be given.

4B

The regulations may apply any provision of Part 7 of Schedule 36 to FA 2008 (penalties), with or without modifications, in relation to requirements imposed under the regulations on a former QROPS.

F724C

Provision under subsection (2A)(b) or (4A)(a) may, in particular, provide for use of a way or form specified by the Commissioners.

5

A recognised overseas pension scheme is excluded from being a qualifying recognised overseas pension scheme by this subsection if F38the Commissioners have decided that—

a

F39any of the following conditions is met in relation to the scheme—

i

there has been a failure to comply with a relevant requirement and the failure is significant,

ii

any information given pursuant to a relevant requirement is F46inaccurate in a material respect,

iii

any declaration given pursuant to a relevant requirement is false in a material respect,

iv

there is no scheme manager, and

b

by reason of F40that condition being met it is not appropriate that transfers of sums or assets held for the purposes of, or representing accrued rights under, registered pension schemes so as to become held for the purposes of, or to represent rights under, the recognised overseas pension scheme should be recognised transfers,

and has notified the person or persons appearing to be the scheme manager of that decision (but subject to subsection (7) and section 170).

F416

A failure to comply with a requirement is significant if—

a

it is a failure to give information or evidence that is (or may be) of significance, or

b

there are reasonable grounds for believing that the failure prejudices (or might prejudice) the assessment or collection of tax by the Commissioners.

7

The Inland Revenue—

a

may at any time after a recognised overseas pension scheme becomes excluded from being a qualifying recognised overseas pension scheme decide that the pension scheme is to cease to be so excluded, and

b

must notify the scheme manager of the decision.

F737A

Regulations may, in a case where—

a

any of the sums and assets transferred by a relevant overseas transfer represent rights in respect of a pension to which a person has become entitled under the transferring scheme (“the original pension”), and

b

those sums and assets are, after the transfer, applied towards the provision of a pension under the other scheme (“the new pension”),

provide that the new pension is to be treated, to such extent as is prescribed and for such of the purposes of this Part as are prescribed, as if it were the original pension.

7B

For the purposes of subsection (7A), a “relevant overseas transfer” is a transfer of sums or assets held for the purposes of, or representing accrued rights under, a relevant overseas scheme (“the transferring scheme”) so as to become held for the purposes of, or to represent rights under—

a

another relevant overseas scheme, or

b

a registered pension scheme,

in connection with a member of that pension scheme.

7C

In subsection (7B) “relevant overseas scheme” means—

a

a QROPS, or

b

a relevant non-UK scheme (see paragraph 1(5) of Schedule 34).

7D

Regulations under subsection (7A) may—

a

apply generally or only in specified cases, and

b

make different provision for different cases.

F368

In subsections (4) to (6) F74, (7A) to (7D) and this subsection—

  • “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;

  • “prescribed” means prescribed by regulations;

  • “QROPS” means a qualifying recognised overseas pension scheme, and “former QROPS” means a scheme that has at any time been a QROPS;

  • “regulations” means regulations made by the Commissioners;

  • “relevant requirement” means—

    1. a

      a requirement imposed by regulations under subsection (4), or

    2. b

      a requirement imposed by virtue of Part 1 of Schedule 36 to FA 2008 (powers to obtain information and documents)F75, or

    3. c

      a requirement to pay overseas transfer charge, or interest on overseas transfer charge, imposed by regulations under section 244L(2) or by an assessment under such regulations.

I7170Appeal against decision to exclude recognised overseas pension scheme

1

This section applies where a recognised overseas pension scheme is excluded from being a qualifying recognised overseas pension scheme by a decision of the Inland Revenue under section 169(5).

2

The scheme manager may appeal against the decision.

F153

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F154

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

An appeal under this section against a decision must be brought within the period of 30 days beginning with the day on which the notification of the decision was given.

6

F16On an appeal that is notified to the tribunal, the tribunal must consider whether the recognised overseas pension scheme ought to have been excluded from being a qualifying recognised overseas pension scheme.

7

If F17the tribunal decides that the recognised overseas pension scheme ought to have been excluded from being a qualifying recognised overseas pension scheme, F18the tribunal must dismiss the appeal.

8

If F19the tribunal decides that the recognised overseas pension scheme ought not to have been excluded from being a qualifying recognised overseas pension scheme, the recognised overseas pension scheme is to be treated as having remained a qualifying recognised overseas pension scheme (but subject to any further appeal F20...).

I8171Scheme administration member payments

1

A “scheme administration member payment” is a payment by a registered pension scheme to or in respect of a F8person who is or has been a member of the pension scheme which is made for the purposes of the administration or management of the pension scheme.

2

But if a payment falling within subsection (1) exceeds the amount which might be expected to be paid to a person who was at arm’s length, the excess is not a scheme administration member payment.

3

Scheme administration member payments include in particular—

a

the payment of wages, salaries or fees to persons engaged in administering the pension scheme, and

b

payments made for the purchase of assets to be held for the purposes of the pension scheme.

4

A loan to or in respect of a F9person who is or has been a member of the pension scheme is not a scheme administration member payment.

5

Regulations made by the Board of Inland Revenue may provide that payments of a description specified in the regulations are, or are not, scheme administration member payments.