Office of Public Sector Information
Section 101
1 Part 4 of FA 2004 (pension schemes etc.) is amended in accordance with paragraphs 2 to 58.
2 In section 153(8) (deferred annuity contract to be registered pension scheme), after “contract” insert “made with an insurance company”.
3 In section 153 (registration of pension schemes), after subsection (8) insert—
“(8A) Where an order has been made under section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (restitution by order of court or Pensions Regulator) that property or money be transferred, or a sum be paid, towards an annuity contract made with an insurance company, the annuity contract is to be treated as having become a registered pension scheme on the day on which it is made.”
4 After section 266 insert—
(1) This section applies where—
(a) a liability to the unauthorised payments charge, or to both the unauthorised payments charge and the unauthorised payments surcharge, has arisen in respect of an unauthorised member payment, and
(b) property or money is transferred, or a sum paid, towards a registered pension scheme pursuant to an order under section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (restitution by order of court or Pensions Regulator) as a result of the unauthorised member payment.
(2) The member of the registered pension scheme to or in respect of whom the unauthorised member payment was made (or, if it was paid after his death, the recipient) may claim relief from—
(a) the relevant proportion of the unauthorised payments charge, and
(b) if a liability to the unauthorised payments surcharge has arisen and subsection (4) is satisfied, the relevant proportion of the unauthorised payments surcharge.
(3) The claim must be made within the period of one year beginning with the day on which the property or money is transferred, or the sum paid.
(4) This subsection is satisfied if no part of the unauthorised member payment and no asset or sum representing it—
(a) has been received by (or on behalf of) the member or a person connected with the member, or
(b) has been held for more than 180 days by a person or succession of persons, other than the member or a person connected with the member, involved in any transaction by which the unauthorised member payment was made.
(5) The relevant proportion of the unauthorised payments charge or the unauthorised payments surcharge is—
where—
ASO is the amount subject to the order, that is the aggregate of the market value of any property and the amount of any money transferred, or the amount of the sum paid, towards a registered pension scheme pursuant to the order under section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 in respect of the unauthorised member payment, and
UMP is the amount of the unauthorised member payment.
(6) But if ASO is greater than UMP, the relevant proportion of the unauthorised payments charge or the unauthorised payments surcharge is the whole of it.
(7) Section 839 of ICTA (connected persons) applies for the purposes of this section.
(1) This section applies where—
(a) the scheme administrator of a registered pension scheme has become liable to the scheme sanction charge in respect of an unauthorised member payment, and
(b) property or money is transferred, or a sum paid, towards a registered pension scheme pursuant to an order under section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (restitution by order of court or Pensions Regulator) as a result of the unauthorised member payment.
(2) The scheme administrator may, within the period of one year beginning with the day on which the property or money is transferred, or the sum paid, claim relief from the relevant proportion of the scheme sanction charge.
(3) The relevant proportion of the scheme sanction charge is—
where—
ASO is the amount subject to the order, that is the aggregate of the market value of any property and the amount of any money transferred, or the amount of the sum paid, towards a registered pension scheme pursuant to the order under section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 in respect of the unauthorised member payment, and
UMP is the amount of the unauthorised member payment.
(4) But if ASO is greater than UMP, the relevant proportion of the scheme sanction charge is the whole of it.”
5 In section 161(5) (payment made to person who is connected with member, or was connected with member at his death, to be treated as made in respect of member), after “scheme to” insert “or in respect of”.
6 (1) Section 162 (meaning of “loan”) is amended as follows.
(2) In subsection (3) (guarantee of loan to or in respect of member or sponsoring employer to be treated as loan), after “scheme” insert “, or to or in respect of a person who is connected with a member or sponsoring employer of a registered pension scheme but is not a member or sponsoring employer of the pension scheme,”.
(3) In subsection (4) (debt of member or sponsoring employer not required to be repaid at normal time to be treated as loan), after “registered pension scheme” insert “or a person who is connected with a member or sponsoring employer of a registered pension scheme but is not a member or sponsoring employer of the pension scheme”.
(4) After subsection (5) insert—
“(6) Section 839 of ICTA (connected persons) applies for the purposes of this section.”
7 In section 165(3) (when a person becomes entitled to a pension), insert at the end (not as part of paragraph (b)) “and, for this purpose, the abatement of a scheme pension under a public service pension scheme is not to be taken to affect the right to receive it.”
8 (1) Schedule 32 (benefit crystallisation events: supplementary) is amended as follows.
(2) In paragraph 9 (benefit crystallisation event 2: meaning of “P”), after sub-paragraph (1) insert—
“(1A) If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining the amount of the pension which will be payable for the purposes of sub-paragraph (1).”
(3) After that paragraph insert—
9A For the purposes of benefit crystallisation event 3, any abatement of the scheme pension is to be left out of account in determining for the purposes of column 1—
(a) the increased annual rate of the pension, and
(b) the rate at which it was payable on the day on which the individual became entitled to it.”
(4) In paragraph 11 (benefit crystallisation event 3: permitted margin in case of post-5th April 2006 pension), after sub-paragraph (7) insert—
“(8) If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining for the purposes of this paragraph the annual amount of the pension at the rate at which it was payable on the day on which the individual became entitled to it.”
(5) In paragraph 12 (benefit crystallisation event 3: permitted margin in case of pre-5th April 2006 pension), after sub-paragraph (3) insert—
“(4) If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining for the purposes of this paragraph the annual amount of the pension at the rate at which it was payable on the day on which the individual became entitled to it.”
(6) In paragraph 13 (benefit crystallisation event 3: meaning of “XP”), after sub-paragraph (2) insert—
“(3) If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining for the purposes of sub-paragraph (1)—
(a) the increased annual rate of the pension, and
(b) the rate at which it was payable on the day on which the individual became entitled to it.”
9 In section 279(1) (definitions), before the definition of “the Board of Inland Revenue” insert—
““abatement”, in relation to a scheme pension under a public service pension scheme, means the reduction of the pension (including its reduction to nil) in accordance with the rules of the pension scheme by reason of re-employment in public service,”.
10 In the table in section 280(2) (index of defined expressions), insert at the appropriate place—
| “abatement | section 279(1)”. |
11 (1) Paragraph 2 of Schedule 28 (scheme pensions) is amended as follows.
(2) Omit sub-paragraph (1) (special provisions for pension scheme with fewer than 50 members).
(3) In sub-paragraph (2) (pension scheme with 50 or more members), for “In the case of a pension scheme with 50 or more members, a” substitute “A”.
(4) In sub-paragraph (3)(b) (no reduction in rate of pension)—
(a) for “in respect of any” substitute “at any time during any”, and
(b) for “in respect of the previous 12 month period” substitute “at the relevant time”.
(5) After that sub-paragraph insert—
“(3A) “The relevant time” is—
(a) in the case of the first relevant 12 month period, the day on which the member becomes entitled to the pension, and
(b) in the case of any other relevant 12 month period, immediately before the beginning of that period.”
(6) In sub-paragraph (4) (things not preventing condition in sub-paragraph (3) being satisfied), omit “or” at the end of paragraph (b) and insert at the end—
“(d) the reduction of the pension in consequence of a pension sharing order or provision,
(e) forfeiture of entitlement to the pension in circumstances prescribed by regulations made by the Board of Inland Revenue,
(f) the reduction of the pension in consequence of an order of a court,
(g) if the pension is under a public service pension scheme, its reduction by abatement, or
(h) the reduction of the pension in any other circumstances prescribed by regulations made by the Board of Inland Revenue.”
(7) After that sub-paragraph insert—
“(4A) In sub-paragraph (4) references to the reduction of a pension include its ceasing to be payable (whether temporarily or permanently).”
(8) After sub-paragraph (6) insert—
“(6A) The Board of Inland Revenue may by regulations provide that if—
(a) a scheme pension payable by an insurance company selected by the scheme administrator of a registered pension scheme (“the original scheme pension”) ceases to be payable, and
(b) in consequence of the transfer of sums or assets (or both) from the insurance company to another insurance company in connection with the original scheme pension ceasing to be payable, another scheme pension becomes payable by the other insurance company (“the new scheme pension”),
the new scheme pension is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original scheme pension.”
(9) Insert at the end—
“(8) Regulations under sub-paragraph (4)(e) and (h) may include provision having effect in relation to times before they are made.”
12 In Schedule 28 (authorised pensions), after paragraph 2 insert—
“2A (1) Where this paragraph applies in relation to a pension payable to the member, the pension scheme is to be treated as making an unauthorised payment to the member of the appropriate amount.
(2) This paragraph applies to a pension if it fails to satisfy the condition in sub-paragraph (3) of paragraph 2—
(a) by reason of not complying with paragraph (a) of that sub-paragraph, or
(b) by reason of not complying with paragraph (b) of that sub-paragraph because a substantial reduction occurs in the rate of the pension,
or if it is a pension the rate of which is reduced in accordance with paragraph (b) of sub-paragraph (4) of paragraph 2 but the reduction is part of avoidance arrangements.
(3) For the purposes of sub-paragraph (2)(b) a substantial reduction occurs in the rate of a pension if the rate at which the pension is payable at any time during any relevant 12 month period (within the meaning of paragraph 2(7)) is less than 80% of the rate payable when the member became entitled to the pension.
(4) For the purposes of sub-paragraph (2) “avoidance arrangements” includes schemes, arrangements and understandings of any kind (whether or not legally enforceable) the main purpose, or one of the main purposes, of which is to increase the member’s entitlement to a lump sum on which there is no liability to income tax.
(5) “The appropriate amount”, in relation to the pension, is the amount of any lump sum on which there is no liability to tax to which the member became entitled in connection with the pension.
(6) Once this paragraph has applied in relation to the pension, it does not apply in relation to it again.
(7) The application of this paragraph in relation to the pension does not prevent any payments of the pension themselves being unauthorised member payments.”
13 (1) Paragraph 3 of Schedule 28 (lifetime annuity) is amended as follows.
(2) For sub-paragraph (1)(d) (lifetime annuity to be level annuity, increasing annuity or relevant linked annuity) substitute—
“(d) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.”
(3) After sub-paragraph (2) insert—
“(2A) An annuity does not fail to satisfy sub-paragraph (1)(d) by reason of the operation of a pension sharing order or provision.
(2B) The Board of Inland Revenue may by regulations make provision in relation to cases in which a lifetime annuity payable by an insurance company (“the original lifetime annuity”) ceases to be payable and in consequence of that—
(a) sums or assets (or both) are transferred from the insurance company to another insurance company and are applied towards the provision of either another lifetime annuity (a “new lifetime annuity”) or a scheme pension, short-term annuity, dependants' scheme pension, dependants' annuity or dependants' short-term annuity by the other insurance company, or
(b) sums or assets are transferred to the relevant registered pension scheme.
(2C) The regulations may provide that—
(a) in a case where a new lifetime annuity becomes payable, the new lifetime annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original lifetime annuity, and
(b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment to the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred.
(2D) For the purposes of sub-paragraphs (2B) and (2C) a registered pension scheme is the relevant registered pension scheme if the original lifetime annuity was acquired using sums or assets held for the purposes of the pension scheme.”
(4) Omit sub-paragraphs (3) to (6) (which define level annuity, increasing annuity and relevant linked annuity).
14 (1) Paragraph 6 of Schedule 28 (short-term annuity) is amended as follows.
(2) In sub-paragraph (1) (meaning of “short-term annuity”), for “An” substitute “For the purposes of this Part an”.
(3) For paragraph (e) of that sub-paragraph (short-term annuity to be level annuity, increasing annuity or relevant linked annuity) substitute—
“(e) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.”
(4) After that sub-paragraph insert—
“(1A) An annuity does not fail to satisfy sub-paragraph (1)(e) by reason of the operation of a pension sharing order or provision.
(1B) The Board of Inland Revenue may by regulations make provision in relation to cases in which a short-term annuity payable by an insurance company (“the original short-term annuity”) ceases to be payable and in consequence of that—
(a) sums or assets (or both) are transferred from the insurance company to another insurance company and are applied towards the provision of either another short-term annuity (a “new short-term annuity”) or a scheme pension, lifetime annuity, dependants' scheme pension, dependants' annuity or dependants' short-term annuity by the other insurance company, or
(b) sums or assets are transferred to the relevant registered pension scheme.
(1C) The regulations may provide that—
(a) in a case where a new short-term annuity becomes payable, the new short-term annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original short-term annuity, and
(b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment to the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred.
(1D) For the purposes of sub-paragraphs (1B) and (1C) a registered pension scheme is the relevant registered pension scheme if the original short-term annuity was acquired using sums or assets held for the purposes of the pension scheme.”
(5) Omit sub-paragraph (2) (which defines level annuity, increasing annuity and relevant linked annuity).
15 (1) Paragraph 17 of Schedule 28 (dependants' annuity) is amended as follows.
(2) In sub-paragraph (1) (meaning of “dependants' annuity”), for “An” substitute “For the purposes of this Part an”.
(3) For paragraph (c) of that sub-paragraph (dependants' annuity to be level annuity, increasing annuity or relevant linked annuity) substitute—
“(c) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue,”.
(4) For sub-paragraph (2) (which defines level annuity, increasing annuity and relevant linked annuity) substitute—
“(2) An annuity does not fail to satisfy sub-paragraph (1)(c) by reason of the operation of a pension sharing order or provision.
(3) The Board of Inland Revenue may by regulations make provision in relation to cases in which a dependants' annuity payable to a person (“the original dependants' annuity”) ceases to be payable and in consequence of that—
(a) sums or assets (or both) are transferred from the insurance company to another insurance company and are applied towards the provision of either another dependants' annuity (a “new dependants' annuity”) or a scheme pension, lifetime annuity, short-term annuity, dependants' scheme pension or dependants' short-term annuity by the other insurance company, or
(b) sums or assets are transferred to the relevant registered pension scheme.
(4) The regulations may provide that—
(a) in a case where a new dependants' annuity becomes payable, the new dependants' annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original dependants' annuity, and
(b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred.
(5) For the purposes of sub-paragraphs (3) and (4) a registered pension scheme is the relevant registered pension scheme if the original dependants' annuity was acquired using sums or assets held for the purposes of the pension scheme.”
16 (1) Paragraph 20 of Schedule 28 (dependants' short-term annuity) is amended as follows.
(2) In sub-paragraph (1) (meaning of “dependants' short-term annuity”), for “An” substitute “For the purposes of this Part an”.
(3) For paragraph (e) of that sub-paragraph (dependants' short-term annuity to be level annuity, increasing annuity or relevant linked annuity) substitute—
“(e) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.”
(4) After that sub-paragraph insert—
“(1A) An annuity does not fail to satisfy sub-paragraph (1)(e) by reason of the operation of a pension sharing order or provision.
(1B) The Board of Inland Revenue may by regulations make provision in relation to cases in which a dependants' short-term annuity payable to a person (“the original dependants' short-term annuity”) ceases to be payable and in consequence of that—
(a) sums or assets (or both) are transferred from the insurance company to another insurance company and are applied towards the provision of either another dependants' short-term annuity (a “new dependants' short-term annuity”) or a scheme pension, lifetime annuity, short-term annuity, dependants' scheme pension or dependants' annuity by the other insurance company, or
(b) sums or assets are transferred to the relevant registered pension scheme.
(1C) The regulations may provide that—
(a) in a case where a new dependants' short-term annuity becomes payable, the new dependants' short-term annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original dependants' short-term annuity, and
(b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred.
(1D) For the purposes of sub-paragraphs (1B) and (1C) a registered pension scheme is the relevant registered pension scheme if the original dependants' short-term annuity was acquired using sums or assets held for the purposes of the pension scheme.”
(5) Omit sub-paragraph (2) (which defines level annuity, increasing annuity and relevant linked annuity).
17 In the table in section 280(2) (index of defined expressions), insert at the appropriate place—
| “dependants' annuity | paragraph 17 of Schedule 28” |
| “dependants'short-term annuity | paragraph 20 of Schedule 28” |
| “short-term annuity | paragraph 6 of Schedule 28”. |
18 (1) Paragraph 8 of Schedule 28 (member’s unsecured pension fund) is amended as follows.
(2) In sub-paragraph (1) (sums and assets designated as available for the payment of unsecured pension), for the words after “of the arrangement” substitute “as are member-designated funds.”
(3) After that sub-paragraph insert—
“(1A) For the purposes of this Part sums or assets held for the purposes of an arrangement are member-designated funds if they—
(a) have been designated at any time under the arrangement as available for the payment of unsecured pension, or
(b) arise, or (directly or indirectly) derive, from sums or assets which have been so designated or which so arise or derive,
and have not been applied towards the provision of a scheme pension.”
(4) In sub-paragraph (3) (“relevant uncrystallised funds”), for the words after “means” substitute—
“(a) if the arrangement is a cash balance arrangement, a sum equal to what would, on the valuation assumption in section 277(a), be available for the provision of benefits to or in respect of the member if the member became entitled to them on reaching the age of 75, and
(b) if it is not, such of the sums and assets held for the purposes of the arrangement as are not member-designated funds and have not been applied towards the provision of a scheme pension or a dependants' scheme pension.”
(5) After that sub-paragraph insert—
“(4) If any sums or assets representing the member’s unsecured pension fund in respect of an arrangement under the pension scheme would (apart from this sub-paragraph) come to be taken to represent another unsecured pension fund of his under the pension scheme, or a dependant’s unsecured pension fund of his under the pension scheme, they are to be treated as not doing so.”
19 (1) Paragraph 10 of Schedule 28 (“unsecured pension years” etc.) is amended as follows.
(2) In sub-paragraph (4)(“basis amount”)—
(a) in paragraph (a), for “or recent additional fund designation” substitute “, recent additional fund designation or recent pension sharing event”, and
(b) in paragraph (b), for “or additional fund designation” substitute “, additional fund designation or pension sharing event”.
(3) After sub-paragraph (8) insert—
“(8A) “Pension sharing event” means the coming into operation of a pension sharing order or provision relating to the sums and assets representing the member’s unsecured pension fund.”
(4) In sub-paragraph (9) (“recent”), for “or additional fund designation” substitute “, additional fund designation or pension sharing event”.
20 (1) Paragraph 11 of Schedule 28 (member’s alternatively secured pension fund) is amended as follows.
(2) In sub-paragraph (1)(b) (exclusion of certain sums and assets), for “for purchasing a scheme pension or a lifetime annuity or paid as income withdrawal” substitute “towards the provision of a scheme pension.”
(3) For sub-paragraphs (2) and (3) (conditions to be met) substitute—
“(2) Condition A is that they—
(a) were part of the member’s unsecured pension fund in respect of the arrangement when the member reached the age of 75, or
(b) arise, or (directly or indirectly) derive, from sums or assets within paragraph (a) or which so arise or derive.
(3) Condition B is that they—
(a) became held for the purposes of the arrangement after the member reached the age of 75 or arise, or (directly or indirectly) derive, from sums or assets which became so held or which so arise or derive, or
(b) if the arrangement is a relevant arrangement, have at any time since the member reached that age been designated as available for the payment of alternatively secured pension to the member or arise, or (directly or indirectly) derive, from sums or assets which have been so designated or which so arise or derive.”
(4) After sub-paragraph (4) insert—
“(5) If any sums or assets representing the member’s alternatively secured pension fund in respect of an arrangement under the pension scheme would (apart from this sub-paragraph) come to be taken to represent another alternatively secured pension fund of his under the pension scheme, or a dependant’s alternatively secured pension fund of his under the pension scheme, they are to be treated as not doing so.”
21 (1) Paragraph 22 of Schedule 28 (dependant’s unsecured pension fund) is amended as follows.
Finance Act 2005