Finance Act 2004

Authorised member payments U.K.

164 Authorised member payments U.K.

[F1 (1)] The only payments a registered pension scheme is authorised to make to or in respect of a [F2 person who is or has been a] member of the pension scheme are—

(a) pensions permitted by the pension rules or the pension death benefit rules [F3 to be paid to or in respect of a member] (see sections 165 and 167),

(b) lump sums permitted by the lump sum rule or the lump sum death benefit rule [F4 to be paid to or in respect of a member] (see sections 166 and 168),

(c) recognised transfers (see section 169),

(d) scheme administration member payments (see section 171),

(e) payments pursuant to a pension sharing order or provision, and

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

[F5 (2) Regulations under subsection (1)(f) may—

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

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

(c) provide that a prescribed event in relation to a prescribed payment is to be treated for the purposes of the lifetime allowance charge as a benefit crystallisation event, and make provision as to the amount crystallised by that event,

F6 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

Textual Amendments

F1 S. 164(1): s. 164 renumbered as s. 164(1) (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 1(2)(a)

F2 Words in s. 164 inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 6(a)

F3 Words in s. 164(a) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 6(b)

F4 Words in s. 164(b) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 6(c)

F5 S. 164(2) inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 1(2)(b)

F6 S. 164(2)(d) omitted (21.7.2009) by virtue of Finance Act 2009 (c. 10), s. 75(2)(a)

Modifications etc. (not altering text)

C1 S. 164 applied (with modifications) (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 8

Commencement Information

I1 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

165 Pension rules U.K.

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

• Pension rule 1

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

• Pension rule 2

  If the member dies before the end of the period of ten years beginning with the day on which the member became entitled to a scheme pension [F7 or an annuity], payment of the scheme pension [F8 or annuity] may continue to be made (to any person) until the end of that period.

  But no other payment of the member’s pension may be made after the member’s death.

• Pension rule 3

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

• Pension rule 4

  If the member has not reached the age of 75, no payment of pension other than—

  (a)

  a scheme pension,

  (b)

  a lifetime annuity, or

  (c)

  unsecured pension,

  may be made in respect of a money purchase arrangement; but a scheme pension may only be paid if the member had an opportunity to select a lifetime annuity instead.

• Pension rule 5

  The total amount of unsecured pension paid in each unsecured pension year in respect of a money purchase arrangement must not exceed 120% of the basis amount for the unsecured pension year.

• Pension rule 6

  If the member has reached the age of 75, no payment of pension other than—

  (a)

  a scheme pension,

  (b)

  a lifetime annuity, or

  (c)

  alternatively secured pension,

  may be made in respect of a money purchase arrangement; but a scheme pension may only be paid if the member had an opportunity to select a lifetime annuity instead.

• Pension rule 7

  The total amount of alternatively secured pension paid in each alternatively secured pension year in respect of a money purchase arrangement must not exceed [F9 90%] of the basis amount for the alternatively secured pension year.

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

(a) an annuity, and

(b) income withdrawal.

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

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

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

[F10 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].

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

Textual Amendments

F7 Words in s. 165(1) substituted (with effect as specified in Sch. 19 para. 29(1) to the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 2(2)(a)

F8 Words in s. 165(1) substituted (with effect as specified in Sch. 19 para. 29(1) to the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 2(2)(b)

F9 Word in s. 165(1) substituted (with effect as specified in Sch. 19 para. 29(2) to the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 2(3)

F10 Words in s. 165(3) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 7, 64(1)

Modifications etc. (not altering text)

C2 S. 165 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), 6

C3 S. 165 modified (27.7.2010) by Finance (No. 2) Act 2010 (c. 31), Sch. 3 para. 2(1)(2)(a) (with Sch. 2 para. 2(1))

C4 S. 165(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 3, 4(1)(2)

Commencement Information

I2 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

166 Lump sum rule U.K.

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

Lump sum rule

No lump sum may be paid other than—

(a) a pension commencement lump sum,

(b) a serious ill-health lump sum,

(c) a short service refund lump sum,

(d) a refund of excess contributions lump sum,

(e) a trivial commutation lump sum,

(f) a winding-up lump sum, or

(g) a lifetime allowance excess lump sum.

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

(a) in the case of a pension commencement lump sum, immediately before the person becomes entitled to the pension in connection with which it is paid [F11 (or, if the person dies before becoming entitled to the pension in connection with which it was anticipated it would be paid, immediately before death)], and

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

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

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

Textual Amendments

F11 Words in s. 166(2)(a) inserted (retrospective to 6.4.2006) by Finance Act 2007 (c. 11), Sch. 20 paras. 9, 24(3)

Modifications etc. (not altering text)

C5 S. 166 applied (with modifications) (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 11

C6 S. 166(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 25(1)-(3)

C7 S. 166(2) modified by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), art. 23B (as inserted (1.6.2009) by S.I. 2009/1172, arts. 1, 3)

Commencement Information

I3 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

167 Pension death benefit rules U.K.

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

Pension death benefit rule 1

No payment of pension death benefit may be made otherwise than to a dependant of the member.

Pension death benefit rule 2

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

Pension death benefit rule 3

If a dependant has not reached the age of 75, no payment of pension death benefit to the dependant other than—

(a) a dependants' scheme pension,

(b) a dependants' annuity, or

(c) dependants' unsecured pension,

may be made to the dependant in respect of a money purchase arrangement; but a dependants' scheme pension may only be paid if the member or dependant had an opportunity to select a dependants' annuity instead.

Pension death benefit rule 4

The total amount of dependants' unsecured pension paid to a dependant in each unsecured pension year in respect of a money purchase arrangement must not exceed 120% of the basis amount for the unsecured pension year.

Pension death benefit rule 5

If a dependant has reached the age of 75, no payment of pension other than—

(a) a dependants' scheme pension,

(b) a dependants' annuity, or

(c) dependants' alternatively secured pension,

may be made to the dependant in respect of a money purchase arrangement; but a dependants' scheme pension may only be paid if the member or dependant had an opportunity to select a dependants' annuity instead.

Pension death benefit rule 6

The total amount of dependants' alternatively secured pension paid to a dependant in each alternatively secured pension year in respect of a money purchase arrangement must not exceed [F12 90%] of the basis amount for the alternatively secured pension year.

(2) [F13 In this part “pension] death benefit” means a pension payable on the death of the member (other than a member’s pension payable after the member’s death under pension rule 2: see section 165).

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

Textual Amendments

F12 Word in s. 167(1) substituted (19.7.2007) (with effect in accordance with Sch. 19 para. 29(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 4

F13 Words in s. 167(2) substituted (retrospective to 6.4.2006) by Finance Act 2007 (c. 11), Sch. 20 paras. 22(1), 24(3)

Modifications etc. (not altering text)

C8 S. 167 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), 7

C9 S. 167 modified (27.7.2010) by Finance (No. 2) Act 2010 (c. 31), Sch. 3 para. 2(1)(2)(c) (with Sch. 2 para. 2(1))

C10 S. 167(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 3, 4(3)(4)

Commencement Information

I4 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

168 Lump sum death benefit rule U.K.

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

Lump sum death benefit rule

No lump sum death benefit may be paid other than—

(a) a defined benefits lump sum death benefit,

(b) a pension protection lump sum death benefit,

(c) an uncrystallised funds lump sum death benefit,

(d) an annuity protection lump sum death benefit,

(e) an unsecured pension fund lump sum death benefit,

(f) a charity lump sum death benefit,

F14 (g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h) a trivial commutation lump sum death benefit, or

(i) a winding-up lump sum death benefit.

(2) In this Part “lump sum death benefit” means a lump sum payable on the death of the member.

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

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

Textual Amendments

F14 S. 168(1)(g) 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. 5, Sch. 27 Pt. 3(1)

Modifications etc. (not altering text)

C11 S. 168 applied (with modifications) (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 14

C12 S. 168(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 6, 8(1)(2)

Commencement Information

I5 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

169 Recognised transfers U.K.

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

(a) another registered pension scheme, or

(b) a qualifying recognised overseas pension scheme,

in connection with a member of that pension scheme.

[F15 (1A) A transfer of sums or assets held for the purposes of, or representing accrued rights under, a registered pension scheme to an insurance company is to be treated as a recognised transfer if the sums or assets had been applied by the pension scheme towards the provision of a scheme pension or a dependants' scheme pension (but subject to regulations under subsections (1B) and (1C)).

(1B) The Board of Inland Revenue may by regulations provide that, where any of the sums or assets transferred represent rights in respect of a scheme pension to which a member of a registered pension scheme has become entitled (“the original scheme pension”)—

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

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

(1C) The Board of Inland Revenue may by regulations provide that, where any of the sums or assets transferred represent rights in respect of a dependants' scheme pension to which a dependant of a member of a registered pension scheme has become entitled in respect of the member (“the original dependants' scheme pension”)—

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

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

(1D) The Board of Inland Revenue may by regulations provide that, where any of the sums or assets transferred represent—

(a) a person's unsecured pension fund or dependant's unsecured pension fund, or

(b) a person's alternatively secured pension fund or dependant's alternatively secured pension fund,

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

(1E) If regulations so provide they may make in relation to cases in which the sums and assets become so held provision as to the treatment for the purposes of any provision of this Part of—

(a) the sums and assets transferred, and

(b) the new arrangement,

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

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

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

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

(c) the scheme manager has undertaken to the Inland Revenue to comply with any prescribed information requirements imposed on the scheme manager, and

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

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

(4) In this section “prescribed information requirements” means—

(a) requirements imposed by or under regulations made by the Board of Inland Revenue to provide to the Inland Revenue any information of a description prescribed by regulations so made, and

(b) requirements specified by regulations so made to provide information to an authority so specified in circumstances so specified.

(5) A recognised overseas pension scheme is excluded from being a qualifying recognised overseas pension scheme by this subsection if the Inland Revenue has decided that—

(a) there has been a failure to comply with any prescribed information requirements imposed on the scheme manager and the failure is significant, and

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

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

(6) A failure to comply with prescribed information requirements imposed on the scheme manager is significant if—

(a) the amount of the information which has not been provided is substantial, or

(b) the failure to provide the information is likely to result in serious prejudice to the assessment or collection of tax.

(7) The Inland Revenue—

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

(b) must notify the scheme manager of the decision.

Textual Amendments

F15 S. 169(1A)-(1E) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 36, 64(1)

Commencement Information

I6 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

170 Appeal against decision to exclude recognised overseas pension scheme U.K.

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

(2) The scheme manager may appeal against the decision.

F16 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F16 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(6) [F17 On an appeal that is notified to the tribunal, the tribunal] must consider whether the recognised overseas pension scheme ought to have been excluded from being a qualifying recognised overseas pension scheme.

(7) If [F18 the tribunal decides] that the recognised overseas pension scheme ought to have been excluded from being a qualifying recognised overseas pension scheme, [F19 the tribunal must] dismiss the appeal.

(8) If [F20 the tribunal decides] that the recognised overseas pension scheme ought not to have been excluded from being a qualifying recognised overseas pension scheme, the recognised overseas pension scheme is to be treated as having remained a qualifying recognised overseas pension scheme (but subject to any further appeal F21 ...).

Textual Amendments

F16 S. 170(3)(4) omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 425(2)

F17 Words in s. 170(6) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 425(3)

F18 Words in s. 170(7) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 425(4)(a)

F19 Words in s. 170(7) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 425(4)(b)

F20 Words in s. 170(8) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 425(5)(a)

F21 Words in s. 170(8) omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 425(5)(b)

Commencement Information

I7 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

171 Scheme administration member payments U.K.

(1) A “scheme administration member payment” is a payment by a registered pension scheme to or in respect of a [F22 person who is or has been a] member of the pension scheme which is made for the purposes of the administration or management of the pension scheme.

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

(3) Scheme administration member payments include in particular—

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

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

(4) A loan to or in respect of a [F23 person who is or has been a] member of the pension scheme is not a scheme administration member payment.

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

Textual Amendments

F22 Words in s. 171(1) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 7

F23 Words in s. 171(4) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 7

Commencement Information

I8 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284