The Taxation of Pension Schemes (Transitional Provisions) Order 2006

Pre-existing entitlement to lump sums and deferment

28.—(1) In the case of an individual who meets the conditions set out in paragraph (2), paragraph (3) applies.

(2) The conditions are as follows.

• Condition A

  The individual is a member of a scheme which falls within paragraph 1(1)(a), (c), (d) or (e) of Schedule 36.

• Condition B

  The individual has become entitled to a tax-free lump sum under that scheme on or before 5th April 2006.

• Condition C

  The individual would but for an election to defer entitlement made on or after 27 July 2004, have been entitled to all or part of the pension to which the lump sum in Condition B relates on or before 5th April 2006.

• Condition D

  A benefit crystallisation event occurs on or after 6th April 2006 in relation to any of the rights, sums and assets of the scheme in relation to the individual.

(3) Paragraph 1 of Schedule 29 shall be modified, as follows.

(a) After sub-paragraph (1) add—

“(1A) Where a member of a scheme has become entitled to a tax free lump sum on or before 5^th April 2006, that lump sum is to be treated as if it were a pension commencement lump sum if—

(a) the member who became entitled to the lump sum is a member of a scheme which falls within paragraph 1(1)(a), (c), (d) or (e) of Schedule 36,

(b) the member has elected to defer entitlement to all or part of the pension to which the lump sum in sub-paragraph (a) relates until after 5th April 2006.

The lump sum shall be treated as if the member became entitled to it on 6th April 2006 and the amount to be treated as having been crystallised at that time shall be the amount of the lump sum to which the member became entitled.

(1AA) No lifetime allowance charge shall arise in respect of the amount deemed to have been crystallised in paragraph (1A).”.

(b) After sub-paragraph (3) add—

“(3A) But a pension —

(a) which becomes payable under a scheme which falls within paragraph 1(1)(a), (c), (d) or (e) of Schedule 36 in respect of which entitlement to a lump sum has already arisen prior to 6th April 2006, and

(b) entitlement to which has been deferred (in whole or in part) until after 5th April 2006,

is not a relevant pension.

(3B) Sub-paragraph (3A) also applies to a pension payable under any registered pension scheme which has received, (whether directly or through one or more intermediate schemes), a transfer of the sums or assets held for the purposes of the scheme referred to in that sub-paragraph to the extent that the pension is payable in respect of those sums or assets and any investment growth that has been made on them.”.