Finance Act 2004 (c. 12)

SCHEDULES

SCHEDULE 36 U.K. Pension schemes etc: transitional provisions and savings

Modifications etc. (not altering text)

C1 Sch. 36 modified by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), art. 23D (as inserted (1.6.2009) by S.I. 2009/1172, arts. 1, 3)

C2 Sch. 36 applied (1.6.2018) by The Local Government Pension Scheme (Scotland) Regulations 2018 (S.S.I. 2018/141), regs. 1(1), 48(2)

Part 2 U.K. Pre-commencement rights: [F1 enhancement of allowances etc]

Textual Amendments

F1 Words in Sch. 36 Pt. 2 heading substituted (6.4.2024 for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 66, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

Modifications etc. (not altering text)

C3 Sch. 36 Pt. 2 applied (with modifications) (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 5-11

[F2 Enhancement of lump sum allowance and lump sum and death benefit allowance U.K.

Textual Amendments

F2 Sch. 36 para. 6A and cross-heading inserted (6.4.2024 for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 67, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

6A (1) Sub-paragraph (2) applies, in relation to a relevant benefit crystallisation event occurring in relation to an individual, other than the individual becoming entitled to a pension commencement lump sum or an uncrystallised funds pension lump sum, where one or more lump sum and death benefit allowance enhancement factors operate in relation to the relevant benefit crystallisation event. U.K.

(2) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were an amount equal to—

where—

• A is—

  (a)

  in the case of an individual in relation to whom a relevant protection provision applies (see sub-paragraph (3)), the individual’s protected lump sum and death benefit allowance (see sub-paragraph (4));

  (b)

  in any other case, £1,073,100;

• B is the aggregate of the lump sum and death benefit allowance enhancement factors that operate in relation to the relevant benefit crystallisation event.

(3) The following provisions are “relevant protection provisions”—

(a) paragraph 7 of this Schedule (primary protection);

(b) paragraph 14 of Schedule 18 to FA 2011 (fixed protection);

(c) paragraph 1 of Schedule 22 to FA 2013 (“fixed protection 2014”);

(d) paragraph 1 of Schedule 6 to FA 2014 (“individual protection 2014”);

(e) paragraph 1 of Schedule 4 to FA 2016 (“fixed protection 2016”);

(f) paragraph 9 of that Schedule (“individual protection 2016”).

(4) In the case of an individual in relation to whom a relevant protection provision applies, the individual’s “protected lump sum and death benefit allowance” is the amount treated as specified in section 637R of ITEPA 2003 in relation to the individual by virtue of the relevant protection provision.

(5) The following paragraphs make provision for the operation of lump sum and death benefit enhancement factors—

• paragraphs 7 to 11A (primary protection);

• paragraph 18 (pre-commencement pension credits);

• paragraph 20A (pension credits from previously crystallised rights);

• paragraphs 20B to 20D (individuals who are not always relevant UK individuals);

• paragraphs 20E to 20G (transfers from recognised overseas pension schemes).

(6) Paragraphs 7 and 18 also make provision enhancing the amount of an individual’s lump sum allowance.

(7) In this paragraph “relevant benefit crystallisation event” has the same meaning as in section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance).]

“Primary protection” U.K.

[F3 7 (1) This paragraph applies in the case of an individual where— U.K.

(a) the amount of the relevant pre-commencement pension rights of the individual exceeds £1,500,000, and

(b) notice of intention to rely on this paragraph is given to His Majesty’s Revenue and Customs in accordance with regulations made by the Commissioners for His Majesty’s Revenue and Customs.

(2) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect—

(a) in relation to a relevant benefit crystallisation event within the meaning of section 637Q of ITEPA 2003 (availability of individual’s lump sum allowance) occurring in relation to the individual, as if the amount specified in section 637P of ITEPA 2003 (individual’s lump sum allowance) were £375,000;

(b) in relation to a relevant benefit crystallisation event within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance) occurring in relation to the individual, as if the amount specified in section 637R of ITEPA 2003 (individual’s lump sum and death benefit allowance) were £1,800,000.

(3) A lump sum and death benefit allowance enhancement factor operates in relation to the relevant benefit crystallisation event mentioned in paragraph 6A(1).

(4) The lump sum and death benefit allowance enhancement factor is the primary protection factor.

(5) The primary protection factor is—

where RR is the amount of the relevant pre-commencement pension rights of the individual (see sub-paragraph (6)).

(6) The amount of the relevant pre-commencement rights of the individual is the aggregate of—

(a) the value of the individual’s relevant uncrystallised pension rights on 5th April 2006 (calculated in accordance with paragraphs 8 and 9), and

(b) the value of the individual’s relevant crystallised pension rights on that date (calculated in accordance with paragraph 10).

(7) Sub-paragraph (5) is subject to paragraph 11 (pension debit on or after 6th April 2006) and paragraph 11A (pension debit on or after 6th April 2006: lump sum death benefits).

(8) Where this paragraph applies in the case of an individual, for the purposes of this Part a lump sum is not an uncrystallised funds pension lump sum (see paragraph 4A of Schedule 29) if—

(a) the lump sum condition (see paragraphs 24(2) and (3), 25 and 26 of this Schedule) is met in relation to the individual, or

(b) immediately before the lump sum is paid, the amount given by the formula in sub-paragraph (9) is less than 25% of the lump sum.

(9) The formula is—

where A is the amount that would be the previously-used amount within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance) if a relevant benefit crystallisation event within the meaning of that section had occurred immediately before the lump sum is paid.]

Textual Amendments

F3 Sch. 36 para. 7 substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 68, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

Modifications etc. (not altering text)

C4 Sch. 36 para. 7 applied (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 29(1)

C5 Sch. 36 para. 7 construed as one with reg. 29 (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 29(3)

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. U.K.

(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.

Modifications etc. (not altering text)

C6 Sch. 36 para. 8(5) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 9, 11

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). U.K.

(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 F4 ...—

(a) the value, or the aggregate of the values, calculated under paragraph 8, [F5 or (if lower)]

(b) the amount arrived at in accordance with sub-paragraph (3).

(3) The amount arrived at in accordance with this sub-paragraph is—

where MPP is the maximum permitted pension [F6 as increased, in a case where sub-paragraph (5A) applies, in accordance with sub-paragraph (5B)].

(4) “The maximum permitted pension” means

[F7 (a) in the case of an arrangement under a pension scheme which immediately before 6th April 2006 was within section [F8 611A(1)(a)] of ICTA, the maximum annual pension that could be paid to the individual under the pension scheme on 5th April 2006, and

(b) in any other case,] 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) [F9 in the case of any arrangement, that] if the individual was in the employment to which the arrangement or arrangements relates or relate on 5th April [F10 2006] the individual left the employment on that date, and

[F11 (aa) in the case of an arrangement within sub-paragraph (4)(a), that the valuation assumptions apply (see section 277),]

(b) [F12 in the case of any other arrangement, that] 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 [F13 scheme] that fact would not give the Board such grounds.

[F14 (5A) This sub-paragraph applies where, in the case of an arrangement under a pension scheme which immediately before 6th April 2006 was within section 611A(1)(a) of ICTA—

(a) a lump sum could be paid to the individual on 5th April 2006 under the pension scheme otherwise than by commutation of pension, and

(b) that lump sum could not be exchanged (in whole or in part) for an increased pension.

(5B) Where sub-paragraph (5A) applies, the amount arrived at under sub-paragraph (3) is the aggregate of what it otherwise would be and so much of the amount of the lump sum as could not be so exchanged.]

(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.

Textual Amendments

F4 Words in Sch. 36 para. 9(2) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 52(3)(a), 64(1), Sch. 11 Pt. 4

F5 Words in Sch. 36 para. 9(2)(a) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 52(3)(b), 64(1)

F6 Words in Sch. 36 para. 9(3) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 36(2)

F7 Words in Sch. 36 para. 9(4) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 52(4), 64(1)

F8 Word in Sch. 36 para. 9(4)(a) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 45

F9 Words in Sch. 36 para. 9(5)(a) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 52(5)(a), 64(1)

F10 Word in Sch. 36 para. 9(5)(a) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 52(5)(a), 64(1)

F11 Sch. 36 para. 9(5)(aa) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 52(5)(b), 64(1)

F12 Words in Sch. 36 para. 9(5)(b) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 52(5)(c), 64(1)

F13 Word in Sch. 36 para. 9(5)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 52(5)(c), 64(1)

F14 Sch. 36 para. 9(5A)(5B) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 36(3)

10 (1) The value of the individual’s relevant crystallised pension rights on 5th April 2006 is— U.K.

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.

11 (1) This paragraph applies where— U.K.

(a) paragraph 7 [F15 applies] 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 [F16 paragraph 7(5)]) is to be recalculated.

(3) The recalculation involves reducing RR (see [F17 paragraph 7(5)]) 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 [F18 relevant 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.

[F19 (5) In this paragraph “relevant benefit crystallisation event” has the same meaning as in section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance).]

Textual Amendments

F15 Word in Sch. 36 para. 11(1)(a) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 69(2), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F16 Words in Sch. 36 para. 11(2) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 69(3), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F17 Words in Sch. 36 para. 11(3) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 69(3), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F18 Words in Sch. 36 para. 11(4) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 69(4), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F19 Sch. 36 para. 11(5) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 69(5), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

[F20 11A (1) This paragraph applies where— U.K.

(a) paragraph 7 [F21 applies] in relation to an individual immediately before the individual's death (and any calculation required by paragraph 11 does not mean that there is then no longer a primary protection factor),

(b) a person is paid a defined benefits lump sum death benefit or an uncrystallised funds lump sum death benefit in respect of the individual, and

(c) notice of intention to rely on this paragraph is given to an officer of Revenue and Customs by that person in accordance with regulations made by the Commissioners for Her Majesty's Revenue and Customs.

(2) If the value of the individual's pre-commencement rights to death benefits (see paragraphs 11B to 11D) exceeds RR (as adjusted under paragraph 11, where that paragraph applies), the primary protection factor is to be recalculated.

(3) The re-calculation involves taking RR to be the value of the individual's pre-commencement rights to death benefits and arriving at a revised primary protection factor.

(4) The revised primary protection factor operates in relation to—

(a) the [F22 relevant benefit crystallisation event] consisting of the payment of the lump sum death benefit, and

(b) any other [F23 relevant benefit crystallisation event] consisting of the payment of a lump sum death benefit in respect of the individual.

[F24 (5) In this paragraph “relevant benefit crystallisation event” has the same meaning as in section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance).]

Textual Amendments

F20 Sch. 36 paras. 11A-11D inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 38

F21 Word in Sch. 36 para. 11A(1)(a) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 70(2), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F22 Words in Sch. 36 para. 11A(4)(a) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 70(3), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F23 Words in Sch. 36 para. 11A(4)(b) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 70(3), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F24 Sch. 36 para. 11A(5) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 70(4), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

11B (1) This paragraph and paragraphs 11C and 11D specify the value of the individual's pre-commencement rights to death benefits. U.K.

(2) Subject to paragraphs 11C and 11D, the value of the individual's pre-commencement rights to death benefits is the aggregate of the maximum amounts that could have been paid—

(a) in respect of the individual as uncrystallised rights lump sum death benefits, and

(b) under relevant pension arrangements relating to the individual,

if the individual had died on 5th April 2006.

(3) Lump sum death benefits are “uncrystallised rights lump sum death benefits” if they are attributable to rights in respect of which the individual had not, on 5th April 2006, become entitled to the present payment of benefits.

(4) An arrangement is a “relevant pension arrangement” if it is an arrangement under a pension scheme within paragraph 1(1).

Textual Amendments

F20 Sch. 36 paras. 11A-11D inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 38

11C (1) In arriving at the aggregate mentioned in paragraph 11B(2) the following amounts are to be left out of account— U.K.

(a) in the case of any lump sum death benefit which could have been paid under a pension scheme in the case of which approval could have been withdrawn under section 591B, 620(7) or 650 of ICTA, any amount in excess of the permitted limit (see sub-paragraph (2)), and

(b) in the case of any lump sum death benefit which could have been paid under an arrangement in the case of which rights to such a benefit are commuted into prospective rights to receive dependants' pensions, any dependants' pension proportion amount (see sub-paragraphs (3) and (4)).

(2) An “amount in excess of the permitted limit” is so much (if any) of the maximum amount of any lump sum death benefit as could not have been paid without having given grounds for withdrawing approval of the pension scheme under section 591B, 620(7) or 650 of ICTA.

(3) A “dependants' pension proportion amount” is so much (if any) of the maximum amount of any lump sum death benefit which could have been paid under the arrangement as is the dependants' pension proportion of the lump sum death benefit.

(4) The dependants' pension proportion is—

where—

TA is the amount which, at the time when a defined benefits lump sum death benefit or uncrystallised funds lump sum death benefit is first paid in respect of the individual, is the aggregate of the maximum amounts of any defined benefits lump sum death benefits or uncrystallised funds lump sum death benefits which could be paid under the arrangement in respect of the individual, and

UTA is what TA would be if no prospective rights to the payment of any of those lump sum death benefits had been commuted into prospective rights to receive dependants' pensions.

Textual Amendments

F20 Sch. 36 paras. 11A-11D inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 38

11D (1) Sub-paragraph (2) applies where any of the lump sum death benefits mentioned in sub-paragraph (2) of paragraph 11B would have been payable under a policy of life insurance held for the purposes of a pension scheme and on 5th April 2006 the pension scheme either— U.K.

(a) was not an occupational pension scheme, or

(b) was an occupational pension scheme with fewer than 20 members.

(2) The lump sum death benefit is only to be taken into account in arriving at the aggregate mentioned in that sub-paragraph if—

(a) a sum was paid under the policy when the individual actually died, and

(b) the terms of the policy had not been varied significantly during the period beginning with 5th April 2006 and ending with the death;

and any exercise of rights conferred by the policy is to be regarded for this purpose as a variation.

[F25 (2A) A variation of the terms of a policy of life insurance made in order to comply with [F26 Part 5 of the Equality Act 2010, so far as relating to age, or the] Employment Equality (Age) Regulations (Northern Ireland) 2006 (or any regulations amending or replacing [F27 those Regulations.]) is to be ignored for the purposes of sub-paragraph (2).

(2B) Where a policy of life insurance held on 5th April 2006 for the purposes of an occupational pension scheme is surrendered and a new one is taken out—

(a) as part of a retirement-benefit activities compliance exercise, or

(b) to comply with the [F28 Part 5 of the Equality Act 2010, so far as relating to age, or the] Employment Equality (Age) Regulations (Northern Ireland) 2006 (or any regulations amending or replacing [F29 those Regulations.]),

the new policy is to be treated for the purposes of sub-paragraph (2) as if it were the same as the old.

(2C) For this purpose a policy of life insurance is surrendered and a new one is taken out as part of a retirement-benefit activities compliance exercise if—

(a) the surrender of the old policy and taking out of the new policy constitute or form part of a transaction the purpose of which is to secure that the activities of the pension scheme are limited to retirement-benefit activities within the meaning of section 255 of the Pensions Act 2004 or Article 232 of the Pensions (Northern Ireland) Order 2005, and

(b) the rights under the old policy and the new policy are not significantly different.]

(3) Sub-paragraph (4) applies where any of the lump sum death benefits mentioned in sub-paragraph (2) of paragraph 11B would have been payable under an occupational pension scheme.

(4) The lump sum death benefit is only to be taken into account in arriving at the aggregate mentioned in that sub-paragraph if—

(a) the individual was employed by a person on 5th April 2006 and continued to be employed by that person or a person connected with that person until the time when the individual died,

(b) that person was a sponsoring employer in relation to the pension scheme on 5th April 2006, and

(c) the individual had not become entitled to the present payment of benefits in respect of rights under the pension scheme before the time when the individual died.

[F30 (5) For the purposes of this paragraph whether a person is connected with another person is determined in accordance with section 993 of ITA 2007.]]

Textual Amendments

F20 Sch. 36 paras. 11A-11D inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 38

F25 Sch. 36 paras. 11D(2A)-(2C) inserted (retrospective to 6.4.2006) by Finance Act 2007 (c. 11), Sch. 20 paras. 15, 24(3)

F26 Words in Sch. 36 para. 11D(2A) substituted by 2010 c. 15, Sch. 26 Pt. 1 para. 59(a) (as inserted (E.W.S.) (1.10.2010) by The Equality Act 2010 (Consequential Amendments, Saving and Supplementary Provisions) Order 2010 (S.I. 2010/2279), art. 1(2), Sch. 1 para. 5 (see S.I. 2010/2317, art. 2))

F27 Words in Sch. 36 para. 11D(2A) substituted by 2010 c. 15, Sch. 26 Pt. 1 para. 59(b) (as inserted (E.W.S.) (1.10.2010) by The Equality Act 2010 (Consequential Amendments, Saving and Supplementary Provisions) Order 2010 (S.I. 2010/2279), art. 1(2), Sch. 1 para. 5 (see S.I. 2010/2317, art. 2))

F28 Words in Sch. 36 para. 11D(2B)(b) substituted by 2010 c. 15, Sch. 26 Pt. 1 para. 59(a) (as inserted (E.W.S.) (1.10.2010) by The Equality Act 2010 (Consequential Amendments, Saving and Supplementary Provisions) Order 2010 (S.I. 2010/2279), art. 1(2), Sch. 1 para. 5 (see S.I. 2010/2317, art. 2))

F29 Words in Sch. 36 para. 11D(2B)(b) substituted by 2010 c. 15, Sch. 26 Pt. 1 para. 59(b) (as inserted (E.W.S.) (1.10.2010) by The Equality Act 2010 (Consequential Amendments, Saving and Supplementary Provisions) Order 2010 (S.I. 2010/2279), art. 1(2), Sch. 1 para. 5 (see S.I. 2010/2317, art. 2))

F30 Sch. 36 para. 11D(5) substituted (with effect in accordance with s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 485 (with Sch. 2)

“Enhanced protection” U.K.

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. U.K.

(2) But this paragraph ceases to apply if [F31 the notice under sub-paragraph (1) is given on or after 15 March 2023 and]—

(a) relevant benefit accrual occurs under the arrangement, or any of the arrangements (see paragraph 13),

[F32 (aa) there is an impermissible transfer into the arrangement or any of the arrangements (see paragraph 17A),]

(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 [F33 in permitted circumstances].

[F34 (2A) An arrangement is made in permitted circumstances if it is made—

(a) for the purposes of a permitted transfer,

(b) as part of a retirement-benefit activities compliance exercise, or

(c) as part of an age-equality compliance exercise.

(2B) For the purposes of sub-paragraph (2A)(b) an arrangement (“the new arrangement”) relating to an individual is made as part of a retirement-benefit activities compliance exercise if—

(a) it is made in connection with the cancellation of rights under another arrangement relating to the individual (“the old arrangement”),

(b) the old arrangement and the new arrangement relate to the same employment,

(c) there is a prospective entitlement to pension death benefits within section 167(1) or lump sum death benefits within section 168(1) (or both) under both the old arrangement and the new arrangement,

(d) the making of the new arrangement and the cancellation of the old arrangement constitute or form part of a transaction the purpose of which is to secure that the activities of the pension scheme under which the arrangement is made are limited to retirement-benefit activities within the meaning of section 255 of the Pensions Act 2004 or Article 232 of the Pensions (Northern Ireland) Order 2005, and

(e) the rights cancelled under the old arrangement and the rights conferred under the new arrangement are not significantly different.

(2C) For the purposes of sub-paragraph (2A)(c) an arrangement (“the new arrangement”) is made as part of an age-equality compliance exercise if—

(a) it is made in connection with the cancellation of rights under another arrangement relating to the individual (“the old arrangement”),

(b) the old arrangement and the new arrangement relate to the same employment,

(c) there is a prospective entitlement to pension death benefits within section 167(1) or lump sum death benefits within section 168(1) (or both) under both the old arrangement and the new arrangement, and

(d) the new arrangement is made, and the old arrangement cancelled, in order to comply with the [F35 Part 5 of the Equality Act 2010, so far as relating to age, or the] or Employment Equality (Age) Regulations (Northern Ireland) 2006 (or any regulations amending or replacing [F36 those Regulations]).]

[F37 (3A) Where this paragraph applies in the case of an individual, Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) and Part 4 of FA 2004 (pensions etc) have effect in relation to the individual with the modifications in sub-paragraphs (3B) to (3F).

(3B) For the purposes of determining the income tax treatment of a lump sum or a lump sum death benefit—

(a) section 637C of that Act (serious ill-health lump sums) has effect as if, in subsection (3) of that section (which defines the permitted maximum), for the words from “so much of” to the end there were substituted “the maximum amount of a serious ill-health lump sum that could have been paid to the individual on 5 April 2024 under the arrangement pursuant to which the individual becomes entitled to the serious ill-health lump sum”;

(b) section 637D of that Act (uncrystallised funds pension lump sums) has effect as if—

(i) in subsection (3) of that section (which defines the permitted maximum), for paragraph (b) there were substituted—

“(b) the maximum amount of an uncrystallised funds pension lump sum that could have been paid to the individual with no liability to income tax on 5 April 2024 under the arrangement pursuant to which the entitlement to the uncrystallised funds pension lump sum arises in respect of the individual.”;

(ii) after that subsection there were inserted—

“(4) But in a case where the individual has previously become entitled to a serious ill-health lump sum—

(a) subsection (3) does not apply, and

(b) in subsection (2) “the permitted maximum”, in relation to an uncrystallised funds pension lump sum paid to the member, is nil.”;

(c) section 637H of that Act (defined benefits lump sum death benefits) has effect as if, in subsection (7) of that section, in the definition of “the permitted maximum”, for the words from “so much of” to the end there were substituted “—

(a) the maximum amount of a defined benefits lump sum death benefit that could have been paid in respect of the individual on 5 April 2024 under the arrangement pursuant to which the entitlement to the defined benefits lump sum death benefit arises in respect of the individual, less

(b) the aggregate of the non-taxable amounts within the meaning given by section 637S(6) of each authorised lump sum death benefit (if any) previously paid in respect of the individual under that arrangement after that date;

or, if that produces a negative result, nil.”;

(d) section 637I of that Act (pension protection lump sum death benefits) has effect as if, in subsection (5) of that section, in the definition of “the permitted maximum”, for the words from “so much of” to the end there were substituted “—

(a) the maximum amount of a pension protection lump sum death benefit that could have been paid in respect of the individual on 5 April 2024 under the arrangement pursuant to which the entitlement to the pension protection lump sum death benefit arises in respect of the individual, less

(b) the aggregate of the non-taxable amounts within the meaning given by section 637S(6) of each authorised lump sum death benefit (if any) previously paid in respect of the individual under that arrangement after that date;

or, if that produces a negative result, nil.”;

(e) section 637J of that Act (uncrystallised funds lump sum death benefits) has effect as if, in subsection (7), in the definition of “the permitted maximum”, for the words from “so much of” to the end there were substituted “—

(a) the maximum amount of an uncrystallised funds lump sum death benefit that could have been paid in respect of the individual on 5 April 2024 under the arrangement pursuant to which the entitlement to the uncrystallised funds lump sum death benefit arises in respect of the individual, less

(b) the aggregate of the non-taxable amounts within the meaning given by section 637S(6) of each authorised lump sum death benefit (if any) previously paid in respect of the individual under that arrangement after that date;

or, if that produces a negative result, nil.”;

(f) section 637K of that Act (annuity protection lump sum death benefits) has effect as if, in subsection (5), in the definition of “the permitted maximum”, for the words from “so much of” to the end there were substituted “—

(a) the maximum amount of an annuity protection lump sum death benefit that could have been paid in respect of the individual on 5 April 2024 under the arrangement pursuant to which the entitlement to the annuity protection lump sum death benefit arises in respect of the individual, less

(b) the aggregate of the non-taxable amounts within the meaning given by section 637S(6) of each authorised lump sum death benefit (if any) previously paid in respect of the individual under that arrangement after that date;

or, if that produces a negative result, nil.”;

(g) section 637L of that Act (drawdown pension fund lump sum death benefits) has effect as if, in subsection (8), in the definition of “the permitted maximum”, for the words from “so much of” to the end there were substituted “—

(a) the maximum amount of a drawdown pension fund lump sum death benefit that could have been paid in respect of the individual on 5 April 2024 under the arrangement pursuant to which the entitlement to the drawdown pension fund lump sum death benefit arises in respect of the individual, less

(b) the aggregate of the non-taxable amounts within the meaning given by section 637S(6) of each authorised lump sum death benefit (if any) previously paid in respect of the individual under that arrangement after that date;

or, if that produces a negative result, nil.”;

(h) section 637M of that Act (flexi-access drawdown lump sum death benefits) has effect as if, in subsection (8), in the definition of “the permitted maximum”, for the words from “so much of” to the end there were substituted “—

(a) the maximum amount of a flexi-access drawdown lump sum death benefit that could have been paid in respect of the individual on 5 April 2024 under the arrangement pursuant to which the entitlement to the flexi-access drawdown lump sum death benefit arises in respect of the individual, less

(b) the aggregate of the non-taxable amounts within the meaning given by section 637S(6) of each authorised lump sum death benefit (if any) previously paid in respect of the individual under that arrangement after that date;

or, if that produces a negative result, nil.”;

(i) Schedule 29 to FA 2004 (pension commencement lump sum: definition of “permitted maximum”) has effect as if—

(i) in paragraph 2, sub-paragraph (c) were omitted;

(ii) after paragraph 2 there were inserted—

“2ZA In the case of an individual who has previously become entitled to a serious ill-health lump sum—

(a) paragraph 2 does not apply, and

(b) in paragraph 1 “the permitted maximum”, in relation to a lump sum, is nil.”

(3C) For the purposes of the modifications made by sub-paragraph (3B), the maximum amount of a serious ill-health lump sum or a lump sum death benefit that could have been paid in respect of an individual on 5 April 2024 under an arrangement that is a defined benefits arrangement is an amount equal to the appropriate limit, determined under paragraph 15(4), in relation to payment of the serious ill-health lump sum or the lump sum death benefit.

(3D) For the purposes of the modifications made by sub-paragraph (3B) “authorised lump sum death benefit” means a lump sum death benefit authorised to be paid by the lump sum death benefit rule.

(3E) Section 637P of ITEPA 2003 (individual’s lump sum allowance) applies as if the amount specified in that section were £375,000.

(3F) Section 637R of ITEPA 2003 (individual’s lump sum and death benefit allowance) applies as if the amount specified in that section were an amount equal to the value of the individual’s uncrystallised pension rights on 5 April 2024.

(3G) The Commissioners for His Majesty’s Revenue and Customs may by regulations make provision about how the value of the individual’s uncrystallised pension rights on 5 April 2024 is to be determined for the purposes of sub-paragraph (3F).

(3H) Where this paragraph applies in the case of an individual, for the purposes of this Part a lump sum is not an uncrystallised funds pension lump sum (see paragraph 4A of Schedule 29) if the lump sum condition (see paragraphs 24(2) and (3), 25 and 26 of this Schedule) is met in relation to 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 [F38 9(3)] 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 [F39 9(3)].

(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) F40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the sums or assets F41 . . . are transferred so that sub-paragraph (8) applies in relation to them, and

(c) the aggregate of the amount of [F42 the] sums and the market value of [F42 the] 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 F43 . . . F43 . . .

(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.

[F44 (c) where the arrangement is a cash balance arrangement or a defined benefits arrangement relating to a present or former employment, they are transferred in connection with a relevant business transfer so as to become held for the purposes of, or to represent rights under, a cash balance arrangement or defined benefits arrangement made under a registered pension scheme or recognised overseas pension scheme, or

(d) where the arrangement (“the old arrangement”) is a cash balance arrangement or a defined benefits arrangement, they are transferred as part of a retirement-benefit activities compliance exercise so as to become held for the purposes of, or to represent rights under, a cash balance arrangement or defined benefits arrangement (“the new arrangement”) relating to the same employment as the old arrangement and made under a registered pension scheme or recognised overseas pension scheme.]

[F45 (8A) For the purposes of sub-paragraph (8)(c) “relevant business transfer” means a transfer of an undertaking or a business (or part of an undertaking or a business) from one person to another—

(a) which involves the transfer of at least 20 employees, and

(b) in the case of which, if the transferor and the transferee are bodies corporate, they would not be treated as members of the same group for the purposes of [F46 Part 5 of the Corporation Tax Act 2010].

(8B) For the purposes of sub-paragraph (8)(d) sums or assets held for the purposes of, or representing accrued rights under, the old arrangement are transferred as part of a retirement-benefit activities compliance exercise if—

(a) there is a prospective entitlement to pension death benefits within section 167(1) or lump sum death benefits within section 168(1) (or both) under both the old arrangement and the new arrangement, and

(b) the transfer constitutes or forms part of a transaction the purpose of which is to secure that the activities of the pension scheme under which the old arrangement was made are limited to retirement-benefit activities within the meaning of section 255 of the Pensions Act 2004 or Article 232 of the Pensions (Northern Ireland) Order 2005.]

(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 [F47 , 14 and 17A(1) and (2)]) apply in relation to the arrangement F48 . . . to which the transfer is made, and

(b) if the transfer is a permitted transfer by virtue of sub-paragraph (8)(b) [F49 or (d)], this paragraph (and paragraphs 13 [F50 , 15 and 17A(3)] [F51 to 17]) apply as if the arrangement to which the transfer is made were the same as that from which it is made, [F52 and

(c) if the transfer is a permitted transfer by virtue of sub-paragraph (8)(c), this paragraph (and paragraphs 13, 15 to 17 and 17A(3)) apply as if the arrangement to which the transfer is made were the same as that from which it is made and (if the employment is transferred) as if the employment with the transferee were the employment with the transferor.]

[F53 (10) The Treasury may by order amend sub-paragraph (8) (and make other amendments consequential on any amendment of that sub-paragraph).]

Textual Amendments

F31 Words in Sch. 36 para. 12(2) inserted (for the tax year 2023-24 and subsequent tax years) by Finance (No. 2) Act 2023 (c. 30), s. 23(2)(8)

F32 Sch. 36 para. 12(2)(aa) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(3), 64(1)

F33 Words in Sch. 36 para. 12(2)(c) substituted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 17(2), 24(3)

F34 Sch. 36 para. 12(2A)-(2C) inserted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 17(3), 24(3)

F35 Words in Sch. 36 para. 12(2C)(d) substituted by 2010 c. 15, Sch. 26 Pt. 1 para. 59(a) (as inserted (E.W.S.) (1.10.2010) by The Equality Act 2010 (Consequential Amendments, Saving and Supplementary Provisions) Order 2010 (S.I. 2010/2279), art. 1(2), Sch. 1 para. 5 (see S.I. 2010/2317, art. 2))

F36 Words in Sch. 36 para. 12(2C)(d) substituted by 2010 c. 15, Sch. 26 Pt. 1 para. 59(b) (as inserted (E.W.S.) (1.10.2010) by The Equality Act 2010 (Consequential Amendments, Saving and Supplementary Provisions) Order 2010 (S.I. 2010/2279), art. 1(2), Sch. 1 para. 5 (see S.I. 2010/2317, art. 2))

F37 Sch. 36 para. 12(3A)-(3H) substituted for Sch. 36 para. 12(3) (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 71(2), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F38 Word in Sch. 36 para. 12(5) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(5), 64(1)

F39 Word in Sch. 36 para. 12(6) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(5), 64(1)

F40 Sch. 36 para. 12(7)(a) omitted (retrospectively) by virtue of Finance Act 2007 (c. 11), Sch. 20 paras. 17(4)(a), 24(3)

F41 Words in Sch. 36 para. 12(7)(b) omitted (retrospectively) by virtue of Finance Act 2007 (c. 11), Sch. 20 paras. 17(4)(b), 24(3)

F42 Words in Sch. 36 para. 12(7)(c) substituted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 17(4)(c), 24(3)

F43 Words in Sch. 36 para. 12(8)(a) omitted (retrospectively) by virtue of Finance Act 2007 (c. 11), Sch. 20 paras. 17(5), 24(3)

F44 Sch. 36 para. 12(8)(c)(d) inserted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 17(6), 24(3)

F45 Sch. 36 para. 12(8A)(8B) inserted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 17(7), 24(3)

F46 Words in Sch. 36 para. 12(8A)(b) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 432(2) (with Sch. 2)

F47 Words in Sch. 36 para. 12(9)(a) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(6)(a), 64(1)

F48 Words in Sch. 36 para. 12(9)(a) omitted (retrospectively) by virtue of Finance Act 2007 (c. 11), Sch. 20 paras. 17(8)(a), 24(3)

F49 Words in Sch. 36 para. 12(9)(b) inserted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 17(8)(b), 24(3)

F50 Words in Sch. 36 para. 12(9)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(6)(b), 64(1)

F51 Words in Sch. 36 para. 12(9)(b) inserted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 17(8)(b), 24(3)

F52 Sch. 36 para. 12(9)(c) and preceding word inserted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 17(8)(c), 24(3)

F53 Sch. 36 para. 12(10) inserted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 17(9), 24(3)

Modifications etc. (not altering text)

C7 Sch. 36 para. 12 construed as one with reg. 30 (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 30(3)

C8 Sch. 36 para. 12 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 30(2)

C9 Sch. 36 para. 12(2A)-(2C) applied (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(10)

C10 Sch. 36 para. 12(2A)-(2C) applied (with application in accordance with Sch. 22 para. 1 of the amending Act) by Finance Act 2013 (c. 29), Sch. 22 para. 1(9)

C11 Sch. 36 para. 12(2A)-(2C) applied (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 7

C12 Sch. 36 para. 12(7)-(8B) applied (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(9)

C13 Sch. 36 para. 12(7)-(8B) applied (with application in accordance with Sch. 22 para. 1 of the amending Act) by Finance Act 2013 (c. 29), Sch. 22 para. 1(8)

C14 Sch. 36 para. 12(7)-(8B) applied (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 6

C15 Sch. 36 para. 12(8) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 35

13 U.K. Relevant 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 [F54 or, where the arrangement has been a hybrid arrangement, if a relevant contribution was so paid at any time after 5th April 2006,] (see paragraph 14), and

(b) in the case of a cash balance arrangement or defined benefits arrangement, if, when [F55 the individual becomes entitled to any pension or lump sum or a] 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).

Textual Amendments

F54 Words in Sch. 36 para. 13(a) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(7), 64(1)

F55 Words in Sch. 36 para. 13(b) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 72, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

14 (1) For the purposes of paragraph 13(a) a relevant contribution is paid under the arrangement if— U.K.

(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 [F56 otherwise than by or on behalf of the individual or by an employer of the individual] 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.

F57 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F58 (3) A contribution is not a relevant contribution for the purposes of paragraph 13(a) if—

(a) it may only be applied for or towards the payment of premiums under a policy of insurance on the life of the individual,

(b) the policy is issued, or issued in respect of insurances made, before 6th April 2006,

(c) there is no right to surrender any rights under the policy,

(d) the terms of the policy are not varied significantly during the period beginning with 6th April 2006 and ending with the individual's actual death so as to increase the benefits payable under the policy or extend the period during which benefits are so payable, and

(e) no benefits are paid, or other payments made, under (or on the surrender of rights under) the policy except by reason of the individual's death;

and any exercise of rights conferred by the policy is to be regarded for this purpose as a variation.

[F59 (3A) A variation of the terms of a policy made in order to comply with the [F60 Part 5 of the Equality Act 2010, so far as relating to age, or the] Employment Equality (Age) Regulations (Northern Ireland) 2006 (or any regulations amending or replacing [F61 those Regulations]) is to be ignored for the purposes of sub-paragraph (3).

(3B) Where a policy of insurance on the life of the individual issued, or issued in respect of insurances made, before 6th April 2006 is surrendered and a new one is taken out—

(a) as part of a retirement-benefit activities compliance exercise, or

(b) as part of an age-equality compliance exercise.

the new policy is to be treated for the purposes of sub-paragraph (3) as if it were the same as the old.

(3C) For the purposes of sub-paragraph (3B)(a) a policy is surrendered, and a new policy of life insurance is taken out, as part of a retirement-benefit activities compliance exercise if—

(a) the surrender of the old policy and the taking out of the new policy constitute or form part of a transaction the purpose of which is to secure that the activities of the pension scheme under which the arrangement is made are limited to retirement-benefit activities within the meaning of section 255 of the Pensions Act 2004 or Article 232 of the Pensions (Northern Ireland) Order 2005, and

(b) the rights under the old policy and the new policy are not significantly different.

(3D) For the purposes of sub-paragraph (3B)(b) a policy is surrendered, and a new policy of life insurance is taken out, as part of an age-equality compliance exercise if—

(a) the old policy is surrendered, and the new policy is taken out, in order to comply with [F62 Part 5 of the Equality Act 2010, so far as relating to age, or the] or Employment Equality (Age) Regulations (Northern Ireland) 2006 (or any regulations amending or replacing [F63 those Regulations]), and

(b) any significant difference between the rights under the old policy and the rights under the new policy is attributable to the need to comply with those Regulations (or any regulations amending or replacing them).]

(4) A contribution is not a relevant contribution for the purposes of paragraph 13(a) if it is paid—

(a) by a sponsoring employer,

(b) under a relevant hybrid arrangement, and

(c) solely in respect of the provision in respect of the individual of lump sum death benefits which are defined benefits or cash balance benefits.

(5) A “relevant hybrid arrangement” is a hybrid arrangement under an occupational pension scheme—

(a) which subsequently becomes a money purchase arrangement that is not a cash balance arrangement, and

(b) under which lump sum death benefits would have been payable in respect of the individual if the individual had died on 5th April 2006.]

Textual Amendments

F56 Words in Sch. 36 para. 14(1)(c) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(9), 64(1)

F57 Sch. 36 para. 14(2) omitted (retrospective to 6.4.2013) by virtue of Finance Act 2013 (c. 29), s. 52(9)(10)

F58 Sch. 36 para. 14(3)-(5) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 39

F59 Sch. 36 para. 14(3A)-(3D) inserted (retrospective to 6.4.2006) by Finance Act 2007 (c. 11), Sch. 20 paras. 18, 24(3)

F60 Words in Sch. 36 para. 14(3A) substituted by Equality Act 2010 (c. 15), Sch. 26 Pt. 1 para. 59(a) (as inserted (E.W.S.) (1.10.2010) by S.I. 2010/2279, art. 1(2), Sch. 1 para. 5 (see S.I. 2010/2317, art. 2))

F61 Words in Sch. 36 para. 14(3A) substituted by Equality Act 2010 (c. 15), Sch. 26 Pt. 1 para. 59(b) (as inserted (E.W.S.) (1.10.2010) by S.I. 2010/2279, art. 1(2), Sch. 1 para. 5 (see S.I. 2010/2317, art. 2))

F62 Words in Sch. 36 para. 14(3D)(a) substituted by Equality Act 2010 (c. 15), Sch. 26 Pt. 1 para. 59(a) (as inserted (E.W.S.) (1.10.2010) by S.I. 2010/2279, art. 1(2), Sch. 1 para. 5 (see S.I. 2010/2317, art. 2))

F63 Words in Sch. 36 para. 14(3D)(a) substituted by Equality Act 2010 (c. 15), Sch. 26 Pt. 1 para. 59(b) (as inserted (E.W.S.) (1.10.2010) by S.I. 2010/2279, art. 1(2), Sch. 1 para. 5 (see S.I. 2010/2317, art. 2))

Modifications etc. (not altering text)

C16 Sch. 36 para. 14 applied (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(11)

C17 Sch. 36 para. 14 applied (with application in accordance with Sch. 22 para. 1 of the amending Act) by Finance Act 2013 (c. 29), Sch. 22 para. 1(10)

C18 Sch. 36 para. 14 applied (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 4(4)

15 (1) For the purposes of paragraph 13(b) “the relevant crystallised amount”is— U.K.

(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 [F64 relevant] permitted transfer F65 ..., 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 [F66 which are transferred], and

(b) the market value of any assets held for the purposes of, or representing accrued rights under, the arrangement [F66 which are transferred].

[F67 (2A) In sub-paragraph (2) “relevant permitted transfer” means a permitted transfer that is not a transfer of sums or assets held for the purposes of, or representing accrued rights under, any of the relevant pension schemes so as to become held for the purposes of, or to represent rights under, a qualifying recognised overseas pension scheme in connection with the individual’s membership of that pension scheme.]

(3) For the purposes of this paragraph (and [F68 paragraphs 15A and 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, [F69 is (subject to paragraph 15A) 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) [F70 and paragraph 15A(2)(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) [F71 and paragraph 15A(2)(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.

Textual Amendments

F64 Word in Sch. 36 para. 15(2) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 73(2)(a), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F65 Words in Sch. 36 para. 15(2) omitted (for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2024 (c. 3), Sch. 9 paras. 73(2)(b), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F66 Words in Sch. 36 para. 15(2) inserted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 19(2), 24(3)

F67 Sch. 36 para. 15(2A) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 73(3), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F68 Words in Sch. 36 para. 15(3) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 40(2)

F69 Words in Sch. 36 para. 15(4) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 40(3)

F70 Words in Sch. 36 para. 15(5) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 40(4)

F71 Words in Sch. 36 para. 15(6) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 40(5)

Modifications etc. (not altering text)

C19 Sch. 36 para. 15 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 36

[F72 15A (1) This paragraph applies where— U.K.

(a) a person is paid a defined benefits lump sum death benefit or an uncrystallised funds lump sum death benefit in respect of the individual under the arrangement, and

(b) notice of intention to rely on this paragraph is given to an officer of Revenue and Customs by that person in accordance with regulations made by the Commissioners for Her Majesty's Revenue and Customs.

(2) For the purposes of paragraph 13(b), if the amount yielded by sub-paragraph (3) is greater than what would otherwise be the appropriate limit in relation to a relevant event which consists of—

(a) the payment of the lump sum death benefit, or

(b) the payment of any other lump sum death benefit in respect of the individual under the arrangement or another cash balance arrangement or defined benefits arrangement related to the arrangement,

that greater amount is the appropriate limit in relation to such a relevant event.

(3) The amount yielded by this sub-paragraph is the greater of—

(a) the value of the individual's pre-commencement rights to death benefits, as increased by the relevant indexation percentage (see sub-paragraph (5) of paragraph 15), or

(b) what would be the value of the individual's pre-commencement rights to death benefits on the assumptions specified in sub-paragraph (6) of that paragraph (but subject to the modifications in sub-paragraph (7) of this paragraph).

(4) The value of the individual's pre-commencement rights to death benefits is the aggregate of the maximum amounts that could have been paid in respect of the individual as uncrystallised rights lump sum death benefits under—

(a) the arrangement, or

(b) any other cash balance arrangement or defined benefits arrangement related to the arrangement,

if the individual had died on 5th April 2006.

(5) Lump sum death benefits are “uncrystallised rights lump sum death benefits” if they are attributable to rights in respect of which the individual had not, on 5th April 2006, become entitled to the present payment of benefits.

(6) Paragraphs 11C and 11D apply in arriving at the aggregate mentioned in sub-paragraph (4) as in arriving at that mentioned in paragraph 11B(2) but as if—

(a) each of the references to paragraph 11B(2) were to sub-paragraph (4) of this paragraph, and

(b) in paragraph 11D(1), for “of a pension scheme” there were substituted “ of any arrangement within paragraph 15A(4) under a pension scheme ”.

(7) In their operation for the purposes of this paragraph sub-paragraphs (6) to (11) of paragraph 15 have effect as if—

(a) for the references in sub-paragraphs (6)(a) and (7)(a) and (10) to the time of the first relevant event there were substituted a reference to the time immediately before the individual's death, and

(b) the words in parentheses in sub-paragraph (6)(a) were omitted.]

Textual Amendments

F72 Sch. 36 para. 15A inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 41

16 (1) This paragraph specifies the post-commencement earnings limit if the individual was on 5th April 2006 a person in relation to [F73 whom— U.K.

(a) section 590C of ICTA or paragraph 20 of Schedule 6 to FA 1989 (earnings cap) had effect, or

(b) provision similar to section 590C of ICTA had effect by virtue of conditions imposed under section 591 of that Act (discretionary approval),

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 [F74 £135,000.]

(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 [F75 the earliest of—

(a) the first relevant event,

(b) the individual leaving the employment to which the arrangement relates, and

(c) the individual's death].

[F76 (5A) Where the appropriate three year period ends otherwise than with the first relevant event, Amount B is what it would be apart from this sub-paragraph increased by whichever is the greatest of—

(a) the percentage by which an amount would be increased if it were increased for the period beginning with the date on which it ends 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, or

(c) the percentage by which the retail prices index for the month in which the first relevant event occurs is higher than that for the month in which the appropriate period ends.]

(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.

Textual Amendments

F73 Words in Sch. 36 para. 16(1) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(12), 64(1)

F74 Sum in Sch. 36 para. 16(3) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 74, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F75 Words in Sch. 36 para. 16(5) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(13), 64(1)

F76 Sch. 36 para. 16(5A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(14), 64(1)

17 (1) This paragraph specifies the post-commencement earnings limit in any other case. U.K.

(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—

(a) amount A, and

(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).

[F77 (6) Where the appropriate three year period ends otherwise than with the first relevant event, Amount D is what it would be apart from this sub-paragraph increased by whichever is the greatest of—

(a) the percentage by which an amount would be increased if it were increased for the period beginning with the date on which it ends 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, or

(c) the percentage by which the retail prices index for the month in which the first relevant event occurs is higher than that for the month in which the appropriate period ends.]

Textual Amendments

F77 Sch. 36 para. 17(6) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(15), 64(1)

[F78 17A (1) There is an impermissible transfer into a relevant existing arrangement relating to an individual under a pension scheme in a case where the relevant existing arrangement is a money purchase arrangement that is not a cash balance arrangement if— U.K.

(a) sums or assets held for the purposes of, or representing rights under, an arrangement relating otherwise than to the individual are transferred so as to become held for the purposes of the relevant existing arrangement, otherwise than pursuant to a pension sharing order or provision, [F79 or]

(b) sums or assets which are neither held for the purposes of, nor represent rights under, a pension scheme are so transferred, F80 ...

F80 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) Sub-paragraph (1) applies where the relevant existing arrangement has been a hybrid arrangement as if the references to sums or assets being transferred F81 ... were to transfer or payment at any time after 5th April 2006.

(3) There is an impermissible transfer into a relevant existing arrangement relating to an individual under a pension scheme in a case where the relevant existing arrangement is a cash balance arrangement or a defined benefits arrangement if it becomes a money purchase arrangement that is not a cash balance arrangement.]

Textual Amendments

F78 Sch. 36 para. 17A inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 53(16), 64(1)

F79 Word in Sch. 36 para. 17A(1) inserted (19.7.2007) (with effect in accordance with Sch. 19 para. 29(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 10(a)

F80 Sch. 36 para. 17A(1)(c) and preceding word repealed (19.7.2007) (with effect in accordance with Sch. 19 para. 29(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 10(a), Sch. 27 Pt. 3(1)

F81 Words in Sch. 36 para. 17A(2) repealed (19.7.2007) (with effect in accordance with Sch. 19 para. 29(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 10(b), Sch. 27 Pt. 3(1)

Modifications etc. (not altering text)

C20 Sch. 36 para. 17A applied (with modifications) (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(8)

C21 Sch. 36 para. 17A 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(7)

C22 Sch. 36 para. 17A applied (with modifications) (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 5

Pre-commencement pension credits U.K.

[F82 18 (1) This paragraph applies in the case of an individual where— U.K.

(a) 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,

(b) notice of intention to rely on this paragraph is given to His Majesty’s Revenue and Customs in accordance with regulations made by the Commissioners for His Majesty’s Revenue and Customs, and

(c) paragraph 7 (primary protection) does not apply in relation to the individual.

(2) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect, in relation to a relevant benefit crystallisation event within the meaning of section 637Q of ITEPA 2003 (availability of individual’s lump sum allowance) occurring in relation to the individual, as if the amount specified in section 637P of ITEPA 2003 (individual’s lump sum allowance) were the lower of—

(a) an amount equal to £268,275 increased by the pre-commencement pension credit factor calculated under sub-paragraph (5), and

(b) £375,000.

(3) A lump sum and death benefit allowance enhancement factor operates in relation to the relevant benefit crystallisation event mentioned in paragraph 6A(1).

(4) The lump sum and death benefit allowance enhancement factor is the pre-commencement pension credit factor calculated under sub-paragraph (5).

(5) The pre-commencement pension credit factor is—

where A 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 (6).

(6) 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.

(7) Where this paragraph applies in the case of an individual, for the purposes of this Part a lump sum is not an uncrystallised funds pension lump sum (see paragraph 4A of Schedule 29) if, immediately before the lump sum is paid, the amount given by the formula in sub-paragraph (8) is less than 25% of the lump sum.

(8) The formula is—

where—

• A is—

  (a)

  in the case of an individual in relation to whom a relevant protection provision applies, the individual’s protected lump sum and death benefit allowance (see paragraph 6A(4));

  (b)

  in any other case, £1,073,100;

• B is the amount that would be the previously-used amount within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance) if a relevant benefit crystallisation event within the meaning of that section had occurred immediately before the lump sum is paid.]

Textual Amendments

F82 Sch. 36 para. 18 substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 75, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

Individuals permitted to take pension before normal minimum pension age U.K.

19 (1) This paragraph applies where a [F83 relevant benefit crystallisation event] occurs in relation to an individual who is a member of a registered pension scheme— U.K.

(a) in protected circumstances, and

(b) before the individual reaches normal minimum pension age.

[F84 (1A) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual with the modifications in sub-paragraphs (1B) and (2).

(1B) Where the relevant benefit crystallisation event is the individual becoming entitled to a pension commencement lump sum, section 637P of ITEPA 2003 (individual’s lump sum allowance) applies as if the amount specified in that section were £268,275 reduced by the relevant percentage (see sub-paragraph (4).]

[F85 (2) Where the event is a relevant benefit crystallisation event, section 637R of ITEPA 2003 (individual’s lump sum and death benefit allowance) applies as if the amount specified in that section were the amount determined under sub-paragraph (2A) reduced by the relevant percentage (see sub-paragraph (4).

(2A) That amount is—

(a) £1,073,100, or

(b) in a case where, disregarding sub-paragraph (2), section 637R of ITEPA 2003 (individual’s lump sum and death benefit allowance) would apply in relation to the individual as if it specified any other amount, that amount.]

(3) A [F86 relevant 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—

where Y is the number of complete years falling between the date on which the [F87 relevant benefit crystallisation event] occurs and the date on which the individual will reach normal minimum pension age.

F88 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F89 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F90 (7) In this paragraph “relevant benefit crystallisation event” has the same meaning as in section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance).]

Textual Amendments

F83 Words in Sch. 36 para. 19(1) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 76(2), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F84 Sch. 36 para. 19(1A)(1B) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 76(3), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F85 Sch. 36 para. 19(2)(2A) substituted for Sch. 36 para. 19(2) (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 76(4), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F86 Words in Sch. 36 para. 19(3) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 76(5), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F87 Words in Sch. 36 para. 19(4) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 76(5), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F88 Sch. 36 para. 19(5) omitted (for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2024 (c. 3), Sch. 9 paras. 76(6), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F89 Sch. 36 para. 19(6) omitted (for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2024 (c. 3), Sch. 9 paras. 76(6), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F90 Sch. 36 para. 19(7) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 76(7), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

Pre-commencement pensions U.K.

20 (1) This paragraph makes provision about an individual who, on 5th April 2006— U.K.

[F91 (a)] has an actual (rather than a prospective) right to the payment of one or more relevant existing pensions [F92 , and]

[F92 (b) during the period beginning on 5th April 2006 and ending on 5th April 2024, no benefit crystallisation event within the meaning of section 216 as that provision had effect at the end of that period has occurred in relation to the individual.]

[F93 (1A) Section 637Q of ITEPA 2003 (availability of individual’s lump sum allowance) applies as if, immediately before the first relevant benefit crystallisation event occurring in relation to the individual on or after 6th April 2024—

(a) a relevant benefit crystallisation event within the meaning of that section had occurred in relation to the individual, and

(b) the amount of the lump sum to which the relevant benefit crystallisation event relates was an amount equal to 25% of the value of the individual’s pre-commencement pension rights immediately before the relevant benefit crystallisation event.]

(2) [F94 Section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance)] applies as if, immediately before the first [F95 relevant benefit crystallisation event] occurring in relation to the individual—

(a) a [F96 relevant benefit crystallisation event within the meaning of that section] had occurred in relation to the individual, and

(b) the [F97 amount of the lump sum or lump sum death benefit to which the relevant benefit crystallisation event relates was 25% of] the value of the individual’s pre-commencement pension rights immediately before the [F98 relevant 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—

(a) the annual rate at which the relevant existing pension is payable to the individual at that time, or

(b) 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.

[F99 (4) In the case of drawdown pension, ARP is—

(a) [F100 80% of] the maximum amount that may be paid in the drawdown pension year in which the time falls in accordance with pension rule 5 (see section 165), or

(b) in the case of an arrangement to which subsection (3A) of section 165 [F101 applied at any time before 6 April 2015], [F102 80% of] the maximum amount that could have been paid in accordance with that rule in the drawdown pension year in which that subsection first applied to the arrangement if it had not so applied.]

[F103 (c) in the case of an arrangement to which section 165(3A) never applied but only if the time falls after the member's drawdown pension fund in respect of the arrangement is converted into the member's flexi-access drawdown fund in respect of the arrangement by the operation of any of paragraphs 8B to 8D of Schedule 28, 80% of the maximum amount that could have been paid in accordance with pension rule 5 in the drawdown pension year in which the conversion occurs had no conversion happened in that year by the operation of any of paragraphs 8B to 8D of Schedule 28.

, or]

(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).

Textual Amendments

F91 Words in Sch. 36 para. 20(1) renumbered as Sch. 36 para. 20(1)(a) (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 77(2)(a), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F92 Sch. 36 para. 20(1)(b) and word inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 77(2)(b), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F93 Sch. 36 para. 20(1A) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 77(3), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F94 Words in Sch. 36 para. 20(2) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 77(4)(a)(i), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F95 Words in Sch. 36 para. 20(2) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 77(4)(a)(ii), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F96 Words in Sch. 36 para. 20(2)(a) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 77(4)(b), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F97 Words in Sch. 36 para. 20(2)(b) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 77(4)(c)(i), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F98 Words in Sch. 36 para. 20(2)(b) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 77(4)(c)(ii), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

F99 Sch. 36 para. 20(4) substituted (with effect in accordance with Sch. 16 paras. 85, 104(1) of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 82(2)

F100 Words in Sch. 36 para. 20(4)(a) inserted (17.12.2014) (with effect in accordance with Sch. 1 para. 77(2) of the amending Act) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 77(1)

F101 Words in Sch. 36 para. 20(4)(b) substituted (6.4.2015) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 28(1)(a), (2)

F102 Words in Sch. 36 para. 20(4)(b) inserted (17.12.2014) (with effect in accordance with Sch. 1 para. 77(3) of the amending Act) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 77(1)

F103 Sch. 36 para. 20(4)(c) and word inserted (6.4.2015) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 28(1)(b), (2)

Modifications etc. (not altering text)

C23 Sch. 36 para. 20(2)(b) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 20

C24 Sch. 36 para. 20(4) applied (with modifications) (17.7.2014) by Finance Act 2014 (c. 26), Sch. 6 para. 2(3)(4)(7)(8)

C25 Sch. 36 para. 20(4) applied (with modifications) (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 10(3)

C26 Sch. 36 para. 20(4) applied (with modifications) (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 10(7)

[F104 Pension credits from previously crystallised rights U.K.

Textual Amendments

F104 Sch. 36 paras. 20A-20G and cross-headings inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 78, 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4)

20A (1) This paragraph applies in relation to a relevant benefit crystallisation event occurring in relation to an individual where— U.K.

(a) the individual has (at any time after 5th April 2006 but before 6th April 2024) acquired rights under a registered pension scheme by reason of having become entitled to a pension credit,

(b) the pension credit derived from the same or another registered pension scheme,

(c) the rights under the registered pension scheme which became subject to the corresponding pension debit consisted of, or included, rights to a post-commencement pension in payment, and

(d) notice of intention to rely on this paragraph is given to His Majesty’s Revenue and Customs in accordance with regulations made by the Commissioners for His Majesty’s Revenue and Customs.

(2) “Post-commencement pension in payment” means a pension to which a person became entitled on or after 6th April 2006.

(3) A lump sum and death benefit allowance enhancement factor operates in relation to the relevant benefit crystallisation event mentioned in paragraph 6A(1).

(4) The lump sum and death benefit allowance enhancement factor is the pension credit factor.

(5) The pension credit factor is—

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.

(6) The post-commencement pension in payment portion of the appropriate amount referred to in the definition of A—

(a) in a case where the appropriate amount is arrived at under section 29(2) or (3)(b) of WRPA 1999 or Article 26(2) or (3)(b) of WRP(NI)O 1999, is so much of that amount as is attributable to rights to a post-commencement pension in payment;

(b) in a case where the appropriate amount is arrived at under section 29(3)(a) of WRPA 1999 or Article 26(3)(a) of WRP(NI)O 1999, is so much of that amount as is just and reasonable.

(7) In this paragraph and in paragraphs 20B to 20G, “relevant benefit crystallisation event” has the same meaning as in section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance).

(8) Where this paragraph applies, for the purposes of this Part a lump sum is not an uncrystallised funds pension lump sum (see paragraph 4A of Schedule 29) if, immediately before the lump sum is paid, the amount given by the formula in sub-paragraph (9) is less than 25% of the lump sum.

(9) The formula is—

where—

• A is—

  (a)

  in the case of an individual in relation to whom a relevant protection provision applies, the individual’s protected lump sum and death benefit allowance (see paragraph 6A(4));

  (b)

  in any other case, £1,073,100;

• B is the amount that would be the previously-used amount within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance) if a relevant benefit crystallisation event within the meaning of that section had occurred immediately before the lump sum is paid.

Non-residence: general U.K.

20B (1) This paragraph applies in relation to a relevant benefit crystallisation event occurring in relation to an individual where— U.K.

(a) during any part of the period that is the active membership period in relation to an arrangement relating to the individual under a registered pension scheme, the individual is a relevant overseas individual, and

(b) notice of intention to rely on this paragraph is given to His Majesty’s Revenue and Customs in accordance with regulations made by the Commissioners for His Majesty’s Revenue and Customs.

(2) A lump sum and death benefit allowance enhancement factor operates in relation to the relevant benefit crystallisation event mentioned in paragraph 6A(1).

(3) Paragraph 20C provides the lump sum and death benefit allowance enhancement factor in the case of an arrangement that is a money purchase arrangement.

(4) Paragraph 20D provides the lump sum and death benefit allowance enhancement factor in the case of any other arrangement.

(5) For the purposes of this Part an individual is a relevant overseas individual at any time if, at that time, the individual either is not a relevant UK individual or—

(a) is a relevant UK individual by virtue only of paragraph (c) of section 189(1) (individuals resident in UK at some time in previous five tax years), and

(b) is not employed by a person resident in the United Kingdom.

(6) In this paragraph and in paragraphs 20C and 20D “the active membership period”, in relation to an arrangement relating to the individual, is the period—

(a) beginning with the date on which the benefits first began to accrue to or in respect of the individual under the arrangement or, if later, 6th April 2006, and

(b) ending on 5th April 2024.

(7) But if benefits ceased to accrue to or in respect of the individual under the arrangement at a time before 5th April 2024, the active membership period is to be treated as having ended at that time.

(8) Where this paragraph applies, for the purposes of this Part a lump sum is not an uncrystallised funds pension lump sum (see paragraph 4A of Schedule 29) if, immediately before the lump sum is paid, the amount given by the formula in sub-paragraph (9) is less than 25% of the lump sum.

(9) The formula is—

where—

• A is—

  (a)

  in the case of an individual in relation to whom a relevant protection provision applies, the individual’s protected lump sum and death benefit allowance (see paragraph 6A(4));

  (b)

  in any other case, £1,073,100;

• B is the amount that would be the previously-used amount within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance) if a relevant benefit crystallisation event within the meaning of that section had occurred immediately before the lump sum is paid.

Non-residence: money purchase arrangements U.K.

20C (1) This paragraph applies in the case of an arrangement that is a money purchase arrangement. U.K.

(2) The lump sum and death benefit allowance enhancement factor is—

(a) if the arrangement is a cash balance arrangement, the cash balance arrangement non-residence factor (see sub-paragraphs (3) to (5)), and

(b) in any other case, the other money purchase arrangement non-residence factor (see sub-paragraphs (6) and (7)).

(3) The cash balance arrangement non-residence factor is—

(a) the factor arrived at by the application of sub-paragraph (4) in relation to the part of the active membership period during which the individual was a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was a relevant overseas individual, the aggregate of the factors arrived at by the application of sub-paragraph (4) in relation to each of those parts of that period.

(4) The factor arrived at by the application of this subsection in relation to any part of the active membership period is—

where—

• A is the closing value of the individual’s rights under the arrangement;

• B is the opening value of the individual’s rights under the arrangement.

(5) For the purposes of sub-paragraph (4)—

(a) the closing value of the individual's rights under the arrangement is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the end of that part of that period, and

(b) the opening value of the individual's rights under the arrangement is the amount which would, on the valuation assumptions, be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the beginning of that part of that period.

(6) The other money purchase arrangement non-residence factor is—

(a) the factor arrived at by the application of sub-paragraph (7) in relation to the part of the active membership period during which the individual was a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was a relevant overseas individual, the aggregate of the factors arrived at by the application of sub-paragraph (7) in relation to each of those parts of that period.

(7) The factor arrived at by the application of this sub-paragraph in relation to any part of the active membership period is—

where C is the amount of the contributions made under the arrangement by or in respect of the individual in any part of the active membership period during which the individual is a relevant overseas individual.

Non-residence: other arrangements U.K.

20D (1) This paragraph applies in the case of an arrangement that is not a money purchase arrangement. U.K.

(2) The lump sum and death benefit allowance enhancement factor is—

(a) if the arrangement is a defined benefits arrangement, the defined benefits arrangement non-residence factor (see sub-paragraphs (3) and (4)), and

(b) if the arrangement is a hybrid arrangement, the hybrid arrangement non-residence factor (see sub-paragraphs (5) to (7)).

(3) The defined benefits arrangement non-residence factor is—

(a) the factor arrived at by the application of sub-paragraph (4) in relation to the part of the active membership period during which the individual was a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was a relevant overseas individual, the aggregate of the factors arrived at by the application of sub-paragraph (4) in relation to each of those parts of that period.

(4) The factor arrived at by the application of this sub-paragraph in relation to any part of the active membership period is—

where—

• A is the relevant valuation factor (see section 276);

• B is the amount of the annual rate of the pension which would, on the valuation assumptions (see section 277), be payable to the individual under the arrangement if the individual became entitled to payment of it at the end of that part of that period;

• C is the amount of the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement t (otherwise than by commutation of pension) if the individual became entitled to payment of it at the end of that part of that period;

• D is the amount of the annual rate of the pension which would, on the valuation assumptions, be payable to the individual under the arrangement if the individual became entitled to payment of it at the beginning of that part of that period;

• E is the amount of the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement (otherwise than by commutation of pension) if the individual became entitled to payment of it at the beginning of that part of that period.

(5) The hybrid arrangement non-residence factor is the greater or greatest of such of—

(a) what would be the cash balance arrangement non-residence factor (under section 222) if the arrangement were a cash balance arrangement,

(b) what would be the other money purchase arrangement non-residence factor (under that section) if the arrangement were a collective money purchase arrangement,

(c) what would be the other money purchase arrangement non-residence factor (under that section) if the arrangement were a money purchase arrangement other than a cash balance arrangement or a collective money purchase arrangement, and

(d) what would be the defined benefits arrangement non-residence factor (under sub-paragraphs (3) and (4)) if the arrangement were a defined benefits arrangement,

as are relevant factors in relation to the arrangement.

(6) A factor is a relevant factor in relation to a hybrid arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under the arrangement may be benefits linked to that factor.

(7) For the purposes of sub-paragraph (6)—

(a) cash balance benefits are linked to the cash balance arrangement non-residence factor;

(b) other money purchase benefits are linked to the other money purchase arrangement non-residence factor;

(c) defined benefits are linked to the defined benefits arrangement non-residence factor.

Transfers from recognised overseas pension scheme: general U.K.

20E (1) This paragraph applies in relation to a relevant benefit crystallisation event occurring in relation to an individual where— U.K.

(a) at any time after 5th April 2006 but before 6th April 2024, there has been a recognised overseas scheme transfer, and

(b) notice of intention to rely on it is given to His Majesty’s Revenue and Customs in accordance with regulations made by the Commissioners for His Majesty’s Revenue and Customs.

(2) There is a “recognised overseas scheme transfer” if any sums or assets—

(a) held for the purposes of an arrangement under a recognised overseas pension scheme, or

(b) representing accrued rights under such an arrangement,

are transferred so as to become held for the purposes of, or to represent rights under, an arrangement under a registered pension scheme relating to the individual.

(3) The arrangement specified in sub-paragraph (2)(a) or (b) is referred to in this paragraph and in paragraphs 20F and 20G as the “recognised overseas scheme arrangement”.

(4) A lump sum and death benefit allowance enhancement factor operates in relation to the relevant benefit crystallisation event mentioned in paragraph 6A(1).

(5) The lump sum and death benefit allowance enhancement factor is the recognised overseas scheme transfer factor.

(6) The recognised overseas scheme transfer factor is—

where—

• A is the aggregate of the amount of any sums transferred, and the market value of any assets transferred, on the recognised overseas scheme transfer;

• B is the relevant relievable amount (see paragraphs 20F and 20G).

(7) In this paragraph and in paragraphs 20F and 20G “the overseas arrangement active membership period” is the period—

(a) beginning with the date on which the benefits first began to accrue to or in respect of the individual under the recognised overseas scheme arrangement or, if later, 6th April 2006, and

(b) ending on 5th April 2024.

(8) But if benefits ceased to accrue to or in respect of the individual under the recognised overseas scheme arrangement at a time before 5th April 2024, the overseas arrangement active membership period is to be treated as having ended at that time.

(9) Where this paragraph applies, for the purposes of this Part a lump sum is not an uncrystallised funds pension lump sum (see paragraph 4A of Schedule 29) if, immediately before the lump sum is paid, the amount given by the formula in sub-paragraph (10) is less than 25% of the lump sum.

(10) The formula is—

where—

• A is—

  (a)

  in the case of an individual in relation to whom a relevant protection provision applies, the individual’s protected lump sum and death benefit allowance (see paragraph 6A(4));

  (b)

  in any other case, £1,073,100;

• B is the amount that would be the previously-used amount within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance) if a relevant benefit crystallisation event within the meaning of that section had occurred immediately before the lump sum is paid.

Overseas scheme transfers: money purchase arrangements U.K.

20F (1) This paragraph applies in the case of a recognised overseas scheme arrangement that was a money purchase arrangement. U.K.

(2) The relevant relievable amount is—

(a) if the recognised overseas scheme arrangement was a cash balance arrangement, the cash balance relevant relievable amount (see sub-paragraphs (3) to (5)), and

(b) if the recognised overseas scheme arrangement was any other sort of money purchase arrangement, the other money purchase relevant relievable amount (see sub-paragraphs (6) and (7)).

(3) The cash balance relevant relievable amount is—

(a) the amount arrived at by the application of sub-paragraph (4) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of sub-paragraph (4) in relation to each of those parts of that period.

(4) The amount arrived at by the application of this subsection in relation to any part of the overseas arrangement active membership period is—

where—

• A is the closing value of the individual’s rights under the arrangement, and

• B is the opening value of the individual’s rights under the arrangement.

(5) For the purposes of sub-paragraph (4)—

(a) the closing value of the individual's rights under the recognised overseas scheme arrangement is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the end of that part of that period, and

(b) the opening value of the individual's rights under the arrangement is the amount which would, on the valuation assumptions, be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the beginning of that part of that period.

(6) The other money purchase relevant relievable amount is—

(a) the amount arrived at by the application of sub-paragraph (7) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of sub-paragraph (7) in relation to each of those parts of that period.

(7) The amount arrived at by the application of this sub-paragraph in relation to any part of the overseas arrangement active membership period is the amount of the contributions made under the arrangement by or in respect of the individual in any part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual.

Overseas scheme transfers: other arrangements U.K.

20G (1) This section applies in the case of a recognised overseas scheme arrangement that was not a money purchase arrangement. U.K.

(2) The relevant relievable amount is—

(a) if the recognised overseas scheme arrangement was a defined benefits arrangement, the defined benefits relevant relievable amount (see sub-paragraphs (3) and (4)), and

(b) if the recognised overseas scheme arrangement was a hybrid arrangement, the hybrid relevant relievable amount (see sub-paragraph (5) to (7)).

(3) The defined benefits relevant relievable amount is—

(a) the amount arrived at by the application of sub-paragraph (4) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of sub-paragraph (4) in relation to each of those parts of that period.

(4) The amount arrived at by the application of this subsection in relation to any part of the overseas arrangement active membership period is—

where—

• A is the relevant valuation factor (see section 276);

• B is the annual rate of the pension which would, on the valuation assumptions (see section 277), be payable to the individual under the recognised overseas scheme arrangement if the individual became entitled to payment of it at the end of that part of that period;

• C is the amount of the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement (otherwise than by commutation of pension) if the individual became entitled to payment of it at the end of that part of that period;

• D is the annual rate of the pension which would, on the valuation assumptions, be payable to the individual under the arrangement if the individual became entitled to payment of it at the beginning of that part of that period;

• E is the amount of the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement (otherwise than by commutation of pension) if the individual became entitled to payment of it at the beginning of that part of that period.

(5) The hybrid relevant relievable amount is the greater or greatest of such of—

(a) what would be the cash balance relevant relievable amount (under section 225) if the recognised overseas scheme arrangement had been a cash balance arrangement,

(b) what would be the other money purchase relevant relievable amount (under that section) if that arrangement had been a collective money purchase arrangement,

(c) what would be the other money purchase relevant relievable amount (under that section) if that arrangement had been a money purchase arrangement other than a cash balance arrangement or a collective money purchase arrangement, and

(d) what would be the defined benefits relevant relievable amount (under sub-paragraph (3) and (4)) if that arrangement had been a defined benefits arrangement,

as are relevant to that arrangement.

(6) An amount is relevant to a hybrid arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under the arrangement may be benefits linked to that amount.

(7) For the purposes of sub-paragraph (6)—

(a) cash balance benefits are linked to the cash balance relevant relievable amount;

(b) other money purchase benefits are linked to the other money purchase relevant relievable amount;

(c) defined benefits are linked to the defined benefits relevant relievable amount.]