SCHEDULES
C22SCHEDULE 28Registered pension schemes: authorised pensions—supplementary
C22Part 1Pension rules
Defined benefits and money purchase arrangements
C22C71
For the purposes of this Part the ill-health condition is met if—
a
the scheme administrator has received evidence from a registered medical practitioner that the member is (and will continue to be) incapable of carrying on the member’s occupation because of physical or mental impairment, and
b
the member has in fact ceased to carry on the member’s occupation.
Scheme pension
2
F1011
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
F2A pension payable to the member is a scheme pension for the purposes of this Part if—
a
it is payable by the scheme administrator or by an insurance company selected by the scheme administrator, and
b
it satisfies the condition in sub-paragraph (3).
3
The condition is that (subject to sub-paragraph (4)—
a
the pension is payable (at least annually) until the member’s death or until the later of the member’s death and the end of a term certain not exceeding ten years, and
F1293A
“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.
4
None of the following prevent the pension satisfying the condition in sub-paragraph (3)—
F1a
the reduction of the pension if the member became entitled to it by reason of the ill-health condition being met,
b
a reduction in the rate of the pension which applies to all the scheme pensions being paid to or in respect of members of the pension scheme, F59...
F20c
a reduction in the rate of the pension, taking effect at a time not earlier than when the member reaches the age of 60 and not later than when the member reaches the age of 65, which does not exceed the relevant state retirement pension rate at that time (or the pension ceasing to be payable at such a time if at that time that rate is greater than the rate of the pension),
F12d
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.
F394A
In sub-paragraph (4) references to the reduction of a pension include its ceasing to be payable (whether temporarily or permanently).
F1365
For the purposes of sub-paragraph (4)(c) “the relevant state retirement pension rate” at any time—
a
where no employment of the member to which the pension scheme relates is or has been other than contracted-out employment by reference to the pension scheme, is 125% of the rate of the basic pension at that time or such higher percentage of that rate as the Treasury may by regulations prescribe,
b
where no such employment of the member is or has been contracted-out employment by reference to the pension scheme, is 250% of the rate of the basic pension at that time or such higher percentage of that rate as the Treasury may by regulations prescribe, and
c
otherwise, is such percentage of the rate of the basic pension at that time falling between the percentages for the time being specified under or by virtue of paragraphs (a) and (b) as the Treasury by regulations prescribe;
and regulations under paragraph (c) may prescribe different percentages for different cases.
5A
For the purposes of sub-paragraph (5)—
a
for the meaning of “contracted-out employment” see section 8(1) of the Pension Schemes Act 1993 or section 4(1) of the Pension Schemes (Northern Ireland) Act 1993, and
b
“the basic pension” means the basic pension specified in section 44 of SSCBA 1992 or section 44 of SSCB(NI)A 1992.
6
A pension is payable until the end of a term certain even if it may, after the death of the member during the term, end on the pensioner—
a
marrying,
F31aa
entering into a civil partnership,
b
reaching the age of 18, or
c
ceasing to be in full-time education.
F946A
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.
7
A relevant 12 month period is any 12 month period which—
a
begins on or after the first anniversary of the day on which the member becomes entitled to the pension, and
b
ends before the day on which the pension ceases to be payable.
F198
Regulations under sub-paragraph F35(4)(e) or (h) or (5) may include provision having effect in relation to times before they are made.
F802A
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 F34which is reduced in accordance with paragraph (a) of sub-paragraph (4) of paragraph 2, or the rate of which is reduced in accordance with paragraph (b) of that sub-paragraph, and 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.
Money purchase arrangements
3
1
For the purposes of this Part an annuity payable to the member is a lifetime annuity if—
a
it is payable by an insurance company,
b
the member had an opportunity to select the insurance company,
c
it is payable until the member’s death or until the later of the member’s death and the end of a term certain not exceeding ten years, and
F6d
its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.
2
An annuity is payable until the end of a term certain even if it may, after the death of the member during the term, end on the annuitant—
a
marrying,
F18aa
entering into a civil partnership,
b
reaching the age of 18, or
c
ceasing to be in full-time education.
F1112A
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.
F762CA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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.
F213
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F214
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F215
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F216
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F78Drawdown pension
Sch. 28 para. 4 cross-heading substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 3(2)
4
“F68Drawdown pension” means—
a
a short-term annuity, or
b
income withdrawal.
F795
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term annuity
C28C46
1
F36For the purposes of this Part an annuity payable to the member is a short-term annuity if—
a
it is purchased by the application of sums or assets representing the whole or any part of the F75member's drawdown pension fund in respect of an arrangement,
b
it is payable by an insurance company,
c
the member had an opportunity to select the insurance company,
d
it is payable for a term which does not exceed five years F90..., and
F3e
its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.
F651A
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.
F322
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income withdrawal
C24F167
Income withdrawal” means an amount (other than an annuity) which the member is entitled to be paid from the member's drawdown pension fund in respect of an arrangement.
F4Member's drawdown pension fund
Sch. 28 para. 8 cross-heading substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 6(6)
C27C22C128
1
C25F1071A
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 F23drawdown 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.
F1242
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1243
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F934
If any sums or assets representing the member's F26drawdown 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 F26drawdown pension fund of his under the pension scheme, they are to be treated as not doing so.
F22Drawdown pension year and basis amount for drawdown pension year
Sch. 28 para. 9 cross-heading substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 7(4)
9
C171
F102“Drawdown pension year” means—
C23C3C26C19a
the period of 12 months beginning with the day on which the member first becomes entitled to F71drawdown pension in respect of the arrangement, and
b
each succeeding period of 12 months.
F50This is subject to paragraph 10B.
C16F722
The drawdown pension year in which the member dies is the last drawdown pension year and ends immediately before the member's death.
Unsecured pension year and basis amount for unsecured pension year
C30C22C810
F114A1
This paragraph applies in relation to drawdown pension years beginning on or before the member's 75th birthday.
1
Subject as follows, the period of three drawdown pension years beginning with the first drawdown pension year, and each succeeding period of three drawdown pension years, is a “reference period”.
1ZA
But the reference period in which the member reaches the age of 75 ends with the drawdown pension year in which the member reaches that age.
F281A
Sub-paragraph (1B) applies if, at any time during a reference period (“the current reference period”), the member notifies the scheme administrator that the member wishes a new reference period to begin on the next day that is an anniversary of the reference date in relation to the current reference period.
1B
The scheme administrator may determine—
a
that the current reference period is to end immediately before that day (so that sub-paragraph (1) no longer applies), and
1C
The first day of each reference period is, in relation to that period, “the reference date”.
2
For the first F113drawdown pension year falling within a reference period, the basis amount is the annual amount of the relevant annuity which could have been purchased by the application of the sums and assets representing the F121member's drawdown pension fund on the nominated date (but subject to sub-paragraph (5)).
3
“The nominated date”—
a
in relation to the first reference period, is the reference date, and
b
in relation to any subsequent reference period, is such day, within the period of 60 days ending with the reference date, as is nominated by the scheme administrator (or, if no day is nominated by the scheme administrator, is the reference date).
C314
For each other F85drawdown pension year falling within a reference period, the basis amount is the annual amount of the relevant annuity which could have been purchased by the application of the sums and assets representing the F41member's drawdown pension fund—
a
if there has been no recent annuity purchaseF10, recent additional fund designation or recent pension sharing event, on the nominated date, and
b
otherwise, immediately after the last annuity purchaseF43, additional fund designation or pension sharing event,
(but subject to sub-paragraph (5)).
5
6
F466A
But sub-paragraph (5) does not apply where the operation of that sub-paragraph in relation to an additional fund designation during a drawdown pension year would reduce the basis amount for that drawdown pension year.
C57
“Annuity purchase” means the purchase of a scheme pension or a lifetime annuity by the application of sums or assets representing the whole or part of the F33member's drawdown pension fund.
C58
“Additional fund designation” means the designation under the arrangement of further sums or assets held for the purposes of the arrangement as available for the payment of F55drawdown pension.
C5F1258A
“Pension sharing event” means the coming into operation of a pension sharing order or provision relating to the sums and assets representing the F123member's drawdown pension fund.
9
An annuity purchaseF48, additional fund designation or pension sharing event is “recent” if it took place during the period—
a
beginning with the reference date, and
b
ending with the last day of the immediately preceding F126drawdown pension year.
10
Paragraph 14 defines “relevant annuity”.
F6611
Nothing in this paragraph applies in respect of an arrangement to which section 165(3A) applies.
F13210A
1
This paragraph applies in relation to drawdown pension years beginning after the member's 75th birthday.
2
For the first drawdown pension year beginning after the member reached the age of 75, and each succeeding drawdown pension year, the basis amount is the annual amount of the relevant annuity which could have been purchased by the application of the sums and assets representing the member's drawdown pension fund on the nominated date.
3
In a case where the member first becomes entitled to drawdown pension in respect of the arrangement after reaching the age of 75, “the nominated date”, in relation to the first drawdown pension year in respect of the arrangement, is the first day of that year.
4
In any other case, “the nominated date”, in relation to the first drawdown pension year beginning after the member reached the age of 75, is—
a
if the member and the scheme administrator so agree, the day immediately before the member's 75th birthday, or
b
if they do not so agree, such day within the period of 60 days ending with the first day of the drawdown pension year as is nominated by the scheme administrator (or, if no day is nominated by the scheme administrator, the first day of that year).
5
“The nominated date”, in relation to each other drawdown pension year, is such day within the period of 60 days ending with the first day of the drawdown pension year as is nominated by the scheme administrator (or, if no day is nominated by the scheme administrator, is the first day of that year).
6
On the occasion of each additional fund designation during a drawdown pension year, the basis amount of that drawdown pension year is to be recalculated in accordance with sub-paragraph (7).
7
The basis amount for the drawdown pension year is the annual amount of the relevant annuity which could have been purchased by the application of the sums and assets representing the member's drawdown pension fund immediately after the additional fund designation.
8
But sub-paragraph (6) does not apply where the operation of that sub-paragraph in relation to an additional fund designation during a drawdown pension year would reduce the basis amount for that drawdown pension year.
9
“Additional fund designation” has the meaning given by paragraph 10(8).
10
Paragraph 14 defines “relevant annuity”.
11
Nothing in this paragraph applies in respect of an arrangement to which section 165(3A) applies.
10B
1
This paragraph applies if the member has reached the age of 75.
2
Sub-paragraph (3) applies if, at any time during a drawdown pension year in respect of an arrangement (“the current drawdown pension year”), the member notifies the scheme administrator that the member wishes the drawdown pension year following the current drawdown pension year to begin on the day on which the next drawdown pension year in respect of another arrangement relating to the member under the pension scheme (including any arrangement relating to that person as a dependant) will begin.
3
The scheme administrator may determine—
a
that the current drawdown pension year is to end immediately before that day, and
b
that the period of 12 months beginning with that day, and each succeeding period of 12 months, is a drawdown pension year in respect of the arrangement.
4
The scheme administrator may not make a determination under this paragraph more than once in relation to the same arrangement.
Member’s alternatively secured pension fund
F6011
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alternatively secured pension year and basis amount for alternatively secured pension year
F6012
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alternatively secured pension year and basis amount for alternatively secured pension year
F6013
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Relevant annuity
14
1
A “relevant annuity”is an annuity of a description prescribed by regulations made by the Board of Inland Revenue.
2
The annual amount of a relevant annuity is to be ascertained in accordance with regulations made by the Board of Inland Revenue.
3
The regulations may in particular provide for the annual amount to be ascertained by reference to—
a
comparative annuity tables published by the Financial Services Authority, or
b
material published by any other person.
F95Minimum income requirement
Sch. 28 paras. 14A-14E and cross-headings inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 10
14A
1
A “relevant annuity”is an annuity of a description prescribed by regulations made by the Board of Inland Revenue.
2
The annual amount of a relevant annuity is to be ascertained in accordance with regulations made by the Board of Inland Revenue.
3
The regulations may in particular provide for the annual amount to be ascertained by reference to—
a
comparative annuity tables published by the Financial Services Authority, or
b
material published by any other person.
14B
1
The Treasury may by order amend paragraph 14A(2) so as to substitute a different amount for the amount for the time being specified as the minimum income threshold.
2
The Treasury may by regulations—
a
amend paragraph 14A so as to add, vary or remove descriptions of payments which are relevant income;
b
provide that in prescribed circumstances the whole or part of any relevant payment, or any relevant payment of a prescribed description, is not to be regarded as relevant income.
3
In this paragraph—
“prescribed” means prescribed in regulations made by the Treasury;
“relevant payment” means a payment falling within paragraph 14A(3).
The relevant day
14C
“The relevant day” means—
a
in a case where subsection (3A) of section 165 has not previously applied to an arrangement relating to the member, the day on which the declaration referred to in paragraph (b) of that subsection is made, and
b
in a case where subsection (3A) of that section has previously applied to such an arrangement, the day on which that subsection first so applied.
Relevant contributions
14D
“Relevant contributions” means—
a
relievable pension contributions paid by or on behalf of the member, or
b
contributions paid in respect of the member by an employer of the member.
Valid and accepted declarations
14E
1
A declaration is “valid” if it complies with such requirements as may be prescribed by regulations made by the Commissioners for Her Majesty’s Revenue and Customs.
2
A declaration is accepted by the scheme administrator of a registered pension scheme if, as a result of the making of the declaration, the member becomes eligible to receive payments of drawdown pension in respect of an arrangement under the scheme which, but for the application of section 165(3A), would be unauthorised member payments.
C22Part 2Pension death benefit rules
Defined benefits and money purchase arrangements
15
1
A person who was married to F105, or a civil partner of, the member at the date of the member’s death is a dependant of the member.
F921A
If the rules of the pension scheme so provide, a person who was married to F137, or a civil partner of, the member when the member first became entitled to a pension under the pension scheme is a dependant of the member.
C22
A child of the member is a dependant of the member if the child—
a
has not reached the age of 23, or
C9b
has reached that age and, in the opinion of the scheme administrator, was at the date of the member’s death dependant on the member because of physical or mental impairment.
C13
A person who was not married to F70, or a civil partner of, the member at the date of the member’s death and is not a child of the member is a dependant of the member if, in the opinion of the scheme administrator, at the date of the member’s death—
a
the person was financially dependant on the member,
b
the person’s financial relationship with the member was one of mutual dependence, or
c
the person was dependant on the member because of physical or mental impairment.
16
F731
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
F61A pension payable to a dependant is a dependants' scheme pension F88for the purposes of this Part if—
a
it is payable by the scheme administrator or by an insurance company selected by the scheme administrator, F108...
F108b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F772A
The Board of Inland Revenue may by regulations make provision in relation to cases in which a dependants' scheme pension payable to a dependant of a member of a registered pension scheme by an insurance company (“the original dependants' scheme pension”) 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' scheme pension (a “new dependants' scheme pension”) or a scheme pension, lifetime annuity, short-term annuity, 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.
2B
The regulations may provide that—
a
in a case where a new dependants' scheme pension becomes payable, the new dependants' scheme pension is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original dependants' scheme pension, 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.
2C
For the purposes of sub-paragraphs (2A) and (2B) a registered pension scheme is the relevant registered pension scheme if the original dependants' scheme pension was acquired using sums or assets held for the purposes of the pension scheme.
F1303
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1304
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1305
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1306
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C32F5216A
1
Paragraphs 16B and 16C apply where—
a
the member dies after 5th April 2006,
b
he has reached the age of 75 before his death, and
c
at the time of his death he is actually or prospectively entitled to one or more scheme pensions under the pension scheme.
2
References in this paragraph and paragraph 16B to a scheme pension include a pension payable before 6th April 2006 which would be a scheme pension if payable after that date.
16B
1
Where a pension is payable under the pension scheme to a dependant of the member in the period of 12 months beginning with the date of the member's death (“the post-death year”), so much of the pension as exceeds the initial member pension limit is not a dependants' scheme pension.
2
But if—
a
more than one pension is so payable to one of the dependants of the member in the post-death year, or
b
pensions are so payable to more than one dependant of the member in the post-death year,
(or both), so much of any of the pensions as exceeds the appropriate portion of the initial member pension limit is not a dependants' scheme pension.
3
The “initial member pension limit” is (subject to sub-paragraph (4)) the sum of—
a
the aggregate of the amounts of the scheme pensions to which the member is actually entitled under the pension scheme immediately before his death payable to the member in the period of 12 months ending with the date of his death (“the pre-death year”),
b
the aggregate of the amounts of the scheme pensions to which the member is prospectively entitled under the pension scheme at that time which would have been so payable if he had been actually entitled to the pensions throughout the pre-death year, and
c
5% of the aggregate of the amounts of the lump sums on which there is no liability to income tax to which the member has become entitled in connection with scheme pensions under the pension scheme before his death.
4
But if the member became (actually) entitled to a scheme pension under the pension scheme during the pre-death year, sub-paragraph (3)(a) has effect as if the amount of that scheme pension which was payable to the member under the pension scheme in the pre-death year were the amount which would have been payable to him in the period of 12 months beginning with the date on which he became entitled to it had he not died.
5
The “appropriate portion” of the initial member pension limit, in relation to any pension payable under the pension scheme to a dependant of the member in the post-death year, is—
where—
P is the amount of that pension payable in the post-death year, and
AP is the aggregate of the amounts of each of the pensions payable under the pension scheme to dependants of the member in the post-death year.
16C
1
Where a pension is payable under the pension scheme to a dependant of the member, otherwise than in excepted circumstances, in—
a
the period of 12 months beginning with the end of the post-death year, or
b
any succeeding period of 12 months,
(“the 12 months in question”), so much of the pension as exceeds the current member pension limit is not a dependants' scheme pension.
2
But if—
a
more than one pension is so payable to one of the dependants in the 12 months in question, or
b
pensions are so payable to more than one dependant of the member in the 12 months in question,
(or both), so much of any of the pensions as exceeds the appropriate portion of the current member pension limit is not a dependants' scheme pension.
3
“Excepted circumstances” means—
a
that at the beginning of the period of 12 months in question there are at least 50 pensioner members of the pension scheme, and
b
that the condition in subsection (4) is met.
4
The condition in this subsection is met if —
a
the difference between CYP and PYP in the case of each relevant existing pension is the same amount,
b
the difference between CYP and PYP in the case of each relevant existing pension is the same percentage of PYP, or
c
in the case of each relevant existing pension the difference between CYP and PYP is the aggregate of a percentage of PYP and an amount which are both the same as those the aggregate of which make up the difference between CYP and PYP in the case of each other relevant existing pension.
5
In this section—
“relevant existing pension” means a pension payable to any dependant of any member under the pension scheme throughout the 12 months in question and the immediately preceding period of 12 months,
“CYP”, in relation to a relevant existing pension, is the current year pension, that is the amount of the pension payable in the 12 months in question, and
“PYP”, in relation to a relevant existing pension, is the previous year pension, that is the amount of the pension payable in the immediately preceding period of 12 months.
6
The “current member pension limit”, in relation to the 12 month period in question, is the initial member pension limit increased by the aggregate of—
a
the permitted margin, and
b
the excepted circumstances amount.
7
The “permitted margin” is the amount by which the initial member pension limit would be greater if it had been increased by whichever of calculation A and calculation B gives the greater amount.
8
Calculation A involves increasing the initial member pension limit by the relevant annual percentage rate for the whole of the period—
a
beginning with the first month beginning after the end of the post-death year (“the opening month”), and
b
ending with the first month of the 12 months in question (“the closing month”).
9
The relevant annual percentage rate is—
a
if the relevant valuation factor in relation to the pension scheme is a number greater than 20, the annual rate agreed by the Inland Revenue and the scheme administrator, and
b
otherwise, 5% per annum.
10
Calculation B involves increasing the initial member pension limit by the relevant indexation percentage.
11
If the retail prices index for the closing month is higher than it was for the opening month, the relevant indexation percentage is the percentage increase in the retail prices index.
12
If it is not, the relevant indexation percentage is 0%.
13
The “excepted circumstances amount” is the aggregate of the amounts of the relevant increases in pensions which were payable under the pension scheme to dependants of the member in excepted circumstances in any period or periods within subsection (1)(a) or (b).
14
The relevant increase in the case of any pension payable in relation to any 12 month period under the pension scheme to a dependant of the member is the difference between CYP and PYP (for this purpose reading the references in subsection (5) to the 12 months in question as references to the 12 month period).
15
The “appropriate portion” of the current member pension limit, in relation to any pension payable under the pension scheme to a dependant of the member in the 12 months in question, is—
where—
P is the amount of that pension payable in the 12 months in question, and
AP is the aggregate of the amounts of each of the pensions payable under the pension scheme to one or more dependants of the member in the 12 months in question.
Money purchase arrangements
17
1
F127For the purposes of this Part an annuity payable to a dependant is a dependants' annuity if—
F51za
it is purchased either together with a lifetime annuity payable to the member or after the member's death,
a
it is payable by an insurance company,
b
the member or dependant had an opportunity to select the insurance company,
F122c
its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue,
d
where the dependant is not the member’s child, it is payable until the dependant’s death or until the earlier of the dependant’s marryingF29, entering into a civil partnership or dying, and
e
where the dependant is the member’s child, it is payable until the earlier of the dependant’s ceasing to be a dependant or dying, or until the earliest of the dependant’s marryingF64, entering into a civil partnership, ceasing to be a dependant or dying.
F991A
For the purposes of sub-paragraph (1)(za) a dependants' annuity is purchased together with a lifetime annuity if the dependant's annuity is related to the lifetime annuity.
F472
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.
F374A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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.
18
F83“Dependants' drawdown pension” means—
a
a dependants' short-term annuity, or
b
dependants' income withdrawal.
F919
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C3320
1
F128For the purposes of this Part an annuity payable to a dependant is a dependants' short-term annuity if—
a
it is purchased by the application of sums or assets representing the whole or any part of the F58dependant's drawdown pension fund in respect of an arrangement,
b
it is payable by an insurance company,
c
the dependant had an opportunity to select the insurance company,
d
it is payable for a term which does not exceed five years and ends before the dependant F110... dies, and
F109e
its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.
F841A
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.
F402
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F9721
Dependants' income withdrawal” means an amount (other than an annuity) which the dependant is entitled to be paid from the dependant's drawdown pension fund in respect of an arrangement.
C22C1022
1
For the purposes of this Part a F49dependant's drawdown pension fund in respect of an arrangement consists of such of the sums and assets held for the purposes of the arrangement—
F27a
as are dependant-designated funds, and
b
have not been applied towards the provision of a dependants' scheme pension.
C21F1002
For the purposes of this Part sums or assets held for the purposes of an arrangement are dependant-designated funds if they—
a
have been designated at any time under the arrangement as available for the payment of F118dependants' drawdown pension to the dependant, or
b
arise, or (directly or indirectly) derive, from sums or assets which have been so designated or which so arise or derive.
3
If any sums or assets representing a F53dependant's drawdown pension fund in respect of an arrangement under the pension scheme would (apart from this sub-paragraph)—
a
b
are applied towards the provision of a scheme pension or a lifetime annuity,
they are to be treated as not doing so.
23
C141
F69“Drawdown pension year” means—
C6C13a
the period of 12 months beginning with the day on which the dependant first becomes entitled to F7dependants' drawdown pension in respect of the arrangement, and
b
each succeeding period of 12 months.
F87This is subject to paragraph 24B.
C29F742
The drawdown pension year in which the dependant dies is the last drawdown pension year and ends immediately before the dependant's death.
C11C22C2024
F89A1
This paragraph applies in relation to drawdown pension years beginning on or before the dependant's 75th birthday.
1
Subject as follows, the period of three drawdown pension years beginning with the first drawdown pension year, and each succeeding period of three drawdown pension years, is a “reference period”.
1ZA
But the reference period in which the dependant reaches the age of 75 ends with the drawdown pension year in which the dependant reaches that age.
F81A
Sub-paragraph (1B) applies if, at any time during a reference period (“the current reference period”), the dependant notifies the scheme administrator that the dependant wishes a new reference period to begin on the next day that is an anniversary of the reference date in relation to the current reference period.
1B
The scheme administrator may determine—
a
that the current reference period is to end immediately before that day (so that sub-paragraph (1) no longer applies), and
1C
The first day of each reference period is, in relation to that period, “the reference date”.
2
For the first F62drawdown pension year falling within a reference period, the basis amount is the annual amount of the relevant annuity which could have been purchased by the application of the sums and assets representing the F116dependant's drawdown pension fund on the nominated date (but subject to sub-paragraph (5)).
3
“The nominated date”—
a
in relation to the first reference period, is the reference date, and
b
in relation to any subsequent reference period, is such day, within the period of 60 days ending with the reference date, as is nominated by the scheme administrator (or if no day is nominated by the scheme administrator, is the reference date).
C184
For each other F67drawdown pension year falling within a reference period, the basis amount is the annual amount of the relevant annuity which could have been purchased by the application of the sums and assets representing the F135dependant's drawdown pension fund—
a
if there has been no recent annuity purchaseF82, recent additional fund designation or recent pension sharing event, on the nominated date, and
b
otherwise, immediately after the last annuity purchaseF117, additional fund designation or pension sharing event,
(but subject to sub-paragraph (5)).
5
6
F1206A
But sub-paragraph (5) does not apply where the operation of that sub-paragraph in relation to an additional fund designation during a drawdown pension year would reduce the basis amount for that drawdown pension year.
C157
“Annuity purchase” means the purchase of a dependants' scheme pension or dependants' annuity by the application of sums or assets representing the whole or part of the F15dependant's drawdown pension fund.
C158
C15F138A
“Pension sharing event” means the coming into operation of a pension sharing order or provision relating to the sums and assets representing the F44dependant's drawdown pension fund.
9
An annuity purchaseF38, additional fund designation or pension sharing event is “recent” if it took place during the period—
a
beginning with the reference date, and
b
ending with the last day of the immediately preceding F112drawdown pension year.
10
Paragraph 14 defines “relevant annuity”.
F6311
Nothing in this paragraph applies in respect of an arrangement to which section 167(2A) applies.
F1124A
1
This paragraph applies in relation to drawdown pension years beginning after the dependant's 75th birthday.
2
For each drawdown pension year beginning after the dependant reached the age of 75, the basis amount is the annual amount of the relevant annuity which could have been purchased by the application of the sums and assets representing the dependant's drawdown pension fund on the nominated date.
3
“The nominated date” is such day within the period of 60 days ending with the first day of the drawdown pension year as is nominated by the scheme administrator (or, if no day is nominated by the scheme administrator, is the first day of that year).
4
On the occasion of each additional fund designation during a drawdown pension year, the basis amount of that drawdown pension year is to be recalculated in accordance with sub-paragraph (5).
5
The basis amount for the drawdown pension year is the annual amount of the relevant annuity which could have been purchased by the application of the sums and assets representing the dependant's drawdown pension fund immediately after the additional fund designation.
6
But sub-paragraph (4) does not apply where the operation of that sub-paragraph in relation to an additional fund designation during a drawdown pension year would reduce the basis amount for that drawdown pension year.
7
“Additional fund designation” has the meaning given by paragraph 24(8).
8
Paragraph 14 defines “relevant annuity”.
9
Nothing in this paragraph applies in respect of an arrangement to which section 167(2A) applies.
24B
1
This paragraph applies if the dependant has reached the age of 75.
2
Sub-paragraph (3) applies if, at any time during a drawdown pension year in respect of an arrangement (“the current drawdown pension year”), the dependant notifies the scheme administrator that the dependant wishes the drawdown pension year following the current drawdown pension year to begin on the day on which the next drawdown pension year in respect of another arrangement relating to the dependant under the pension scheme (including any arrangement relating to that person as a member of the scheme) will begin.
3
The scheme administrator may determine—
a
that the current drawdown pension year is to end immediately before that day, and
b
that the period of 12 months beginning with that day, and each succeeding period of 12 months, is a drawdown pension year in respect of the arrangement.
4
The scheme administrator may not make a determination under this paragraph more than once in relation to the same arrangement.
24C
1
The dependant satisfies the minimum income requirement at any time in a tax year if the amount of relevant income payable to the dependant for that tax year is not less than the minimum income threshold.
2
The minimum income threshold is £20,000.
3
“Relevant income” means any of the following kinds of income—
a
payments of a scheme pension or dependants’ scheme pension provided by a registered pension scheme;
b
payments of a lifetime annuity or dependants’ annuity made by a registered pension scheme;
c
payments under an overseas pension scheme which, if the scheme were a registered pension scheme, would fall within paragraph (a) or (b);
d
payments of a social security pension;
e
payments under the financial assistance scheme which are payable until the dependant’s death;
f
payments made under that scheme in anticipation of, and on account of, payments falling within paragraph (e).
4
But “relevant income” does not include—
a
drawdown pension or dependants’ drawdown pension, or
b
any payments under an overseas pension scheme which, if the scheme were a registered pension scheme, would be drawdown pension or dependants’ drawdown pension.
5
A payment of any pension or annuity within sub-paragraph (3), or a payment under the financial assistance scheme, is not to be regarded as relevant income unless the dependant has, at any time before the time mentioned in sub-paragraph (1), already received a payment of that pension or annuity or (as the case may be) a payment under that scheme.
6
For the purposes of sub-paragraph (1), the amount of any relevant income payable in a currency other than sterling is to be taken to be the equivalent amount in sterling, calculated by reference to an appropriate spot rate of exchange prevailing on the relevant day.
7
In this paragraph—
“financial assistance scheme” means the scheme provided for by regulations under section 286 of the Pensions Act 2004;
“social security pension” means—
- a
any pension, benefit or allowance to which section 577 of ITEPA 2003 applies, and
- b
any pension, benefit or allowance which—
- i
is payable under the law of a country or territory outside the United Kingdom, and
- ii
is substantially similar in character to a pension, benefit or allowance to which that section applies.
- i
- a
8
Any regulations made under paragraph 7 of Schedule 34 (application of Part 4 of this Act in relation to relevant non-UK schemes) have effect for the purposes of sub-paragraphs (3)(c) and (4)(b) of this paragraph as they have effect for the purposes of that Schedule.
24D
1
The Treasury may by order amend paragraph 24C(2) so as to substitute a different amount for the amount for the time being specified as the minimum income threshold.
2
The Treasury may by regulations—
a
amend paragraph 24C so as to add, vary or remove descriptions of payments which are relevant income;
b
provide that in prescribed circumstances the whole or part of any relevant payment, or any relevant payment of a prescribed description, is not to be regarded as relevant income.
3
In this paragraph—
“prescribed” means prescribed in regulations made by the Treasury;
“relevant payment” means a payment falling within paragraph 24C(3).
24E
“The relevant day” means—
a
in a case where subsection (2A) of section 167 has not previously applied to an arrangement relating to the dependant, the day on which the declaration referred to in paragraph (b) of that subsection is made, and
b
in a case where subsection (2A) of that section has previously applied to such an arrangement, the day on which that subsection first so applied.
24F
“Relevant contributions” means—
a
relievable pension contributions paid by or on behalf of the dependant, or
b
contributions paid in respect of the dependant by an employer of the dependant.
24G
1
A declaration is “valid” if it complies with such requirements as may be prescribed by regulations made by the Commissioners for Her Majesty’s Revenue and Customs.
2
A declaration is accepted by the scheme administrator of a registered pension scheme if, as a result of the making of the declaration, the dependant becomes eligible to receive payments of dependants’ drawdown pension in respect of an arrangement under the scheme which, but for the application of section 167(2A), would be unauthorised member payments.
F9825
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sch. 28 modified (6.4.2006) by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (S.I. 2006/207), regs. 1(1), 14