The Personal Pension Schemes (Conversion of Retirement Benefits Schemes) Regulations 2001

Explanatory Note

(This note is not part of the Regulations)

These Regulations prescribe the way in which retirement benefits schemes which are money-purchase schemes (“occupational money purchase schemes”) may apply to the Inland Revenue for approval as personal pension schemes. Schedule 23ZA to the Income and Corporation Taxes Act 1988 (c. 1), inserted by paragraph 27 of Schedule 13 to the Finance Act 2000 (c. 17), introduces the possibility of conversion of occupational money purchase schemes into personal pension schemes.

Regulation 1 provides for the citation and commencement of the Regulations and regulation 2 provides definitions for terms used in them.

Regulation 3 prescribes the conditions to be satisfied before an application can be made for conversion from an occupational pension scheme to a personal pension scheme, whilst regulation 4 prescribes the documents which are to accompany an application.

Regulation 5 prescribes descriptions of scheme in respect of which the Board may refuse applications for conversion under Schedule 23ZA unless prescribed conditions are satisfied. These are all schemes other than simplified defined contribution schemes.

Regulation 6 prescribes classes of member of a scheme in respect of whom specific requirements are imposed (“prescribed members”). There are two classes of schemes for the purposes of this regulation. In the case of a scheme of which a controlling director is a member, the classes of prescribed members are controlling directors, those who are persons connected with them and those who are aged not less than 45 years at the proposed date of change and who have, or in the preceding six years have had, earnings exceeding the cap on earnings for the calculation of pension benefits prescribed by section 590C(2) of the Income and Corporation Taxes Act 1988 for the year in which the application under Schedule 23ZA is made. In the case of a scheme of which no controlling director is to be a continuing member, the prescribed members are those aged not less than 45 years at the date of change and who have, or in the preceding six years have had, earnings exceeding the cap.

Regulation 7 prescribes a requirement as to the valuation of the assets held to provide benefits in respect of a prescribed member.

Regulation 8 prescribes action to be taken before a prescribed member, in respect of whom the conversion assets value exceeds the permitted amount at the time of the valuation, may become a member of the resulting personal pension scheme.

Regulations 9, 10 and 11 impose restrictions on the Board’s discretion to approve an application under regulation 3 in respect of the lump sum benefits payable to controlling directors and the death benefits payable to their dependants.