Background Note
50.Finance Act 2004 sets out the tax rules in connection with payments to and from registered pension schemes. It sets out those payments (most commonly pensions and lump sums) that are authorised and the conditions that must be met for each type of payment to be authorised. Where a payment is made that doesn’t meet the conditions to be an authorised payment, various tax charges apply.
51.Sections 41 and 42 of this Act make various changes to the limits that apply when pensions and lump sums can be paid. In addition the Government announced at Budget 14 that new flexibilities would be introduced from April 15 on how individuals could access their pension savings. The Schedule deals with a number of transitional issues arising in consequence of the Budget 14 announcement.
52.One of the authorised payments a scheme can make to a member is the PCLS which is paid tax free. This Schedule amends Finance Act 2004 to ensure that:
Where an intended PCLS is paid before 6 April 2015 in respect of a money purchase arrangement, the pension associated with the PCLS can commence up to 5 October 2015.
Where an intended PCLS is paid before 6 April 2015 in respect of a money purchase arrangement, the pension associated with the PCLS can be paid from a different scheme from that which paid the PCLS.
Where the associated pension is paid from a different scheme to the PCLS under the bullet point above, any right to a protected pension age or protected lump sum is preserved as part of the transfer.
Where an intended PCLS paid before 6 April 2015 in respect of a money purchase arrangement is repaid before 6 October 2015, the intended PCLS is treated for all tax purposes as if it had never been paid, and,
where a member has received an intended PCLS before 27 March 2014, if they commute the uncrystallised expected pension to a lump sum under the trivial commutation or small pots rules then the intended PCLS will continue to be an authorised payment and tax free.
