Finance Act 2004

Money purchase arrangements U.K.

Dependants' annuity U.K.

17 (1) [F1 For the purposes of this Part an] annuity payable to a dependant is a dependants' annuity if— U.K.

[F2 (za) 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,

[F3 (c) 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 marrying[F4 , 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 marrying[F5 , entering into a civil partnership], ceasing to be a dependant or dying.

[F6 (1A) 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.]

[F7 (2) 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.

[F8 (4A) The regulations may include provision having effect in relation to times before they are made if that provision does not increase any person's liability to tax.]

(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.]

Textual Amendments

F1 Words in Sch. 28 para. 17(1) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 15(2), 64(1)

F2 Sch. 28 para. 17(1)(za) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 29(2), 64(1)

F3 Sch. 28 para. 17(1)(c) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 15(3), 64(1)

F4 Words in Sch. 28 para. 17(1)(d) inserted (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 2(3)

F5 Words in Sch. 28 para. 17(1)(e) inserted (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 2(3)

F6 Sch. 28 para. 17(1A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 29(3), 64(1)

F7 Sch. 28 para. 17(2)-(5) substituted for Sch. 28 para. 17(2) (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 15(4), 64(1)

F8 Sch. 28 para. 17(4A) inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 2(3)

Dependants' unsecured pension and dependants' alternatively secured pension U.K.

18 U.K. “Dependants' unsecured pension” means—

(a) a dependants' short-term annuity, or

(b) dependants' income withdrawal.

19 U.K. “Dependants' alternatively secured pension” means dependants' income withdrawal.

Dependants' short-term annuity U.K.

20 (1) [F9 For the purposes of this Part an] annuity payable to a dependant is a dependants' short-term annuity if— U.K.

(a) it is purchased by the application of sums or assets representing the whole or any part of the dependant’s unsecured 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 reaches the age of 75 or dies, and

[F10 (e) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.]

[F11 (1A) 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.]

F12 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F9 Words in Sch. 28 para. 20(1) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(2), 64(1)

F10 Sch. 28 para. 20(1)(e) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(3), 64(1)

F11 Sch. 28 para. 20(1A)-(1D) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(4), 64(1)

F12 Sch. 28 para. 20(2) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(5), 64(1), Sch. 11 Pt. 4

Dependants' income withdrawal U.K.

21 U.K. Dependants' income withdrawal means—

(a) if the dependant has not reached the age of 75, an amount (other than an annuity) which the dependant is entitled to be paid from the dependant’s unsecured pension fund in respect of an arrangement, and

(b) if the dependant has reached the age of 75, an amount which the dependant is entitled to be paid from the dependant’s alternatively secured pension fund in respect of an arrangement.

Dependant’s unsecured pension fund U.K.

22 (1) For the purposes of this Part a dependant’s unsecured pension fund in respect of an arrangement consists of such of the sums and assets held for the purposes of the arrangement— U.K.

[F13 (a) as are dependant-designated funds, and

(b) have not been applied towards the provision of a dependants' scheme pension.]

[F14 (2) 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 dependant's unsecured 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 dependant's unsecured pension fund in respect of an arrangement under the pension scheme would (apart from this sub-paragraph)—

(a) come to be taken to represent another dependant's unsecured pension fund of his under the pension scheme, or an unsecured pension fund of his under the pension scheme, or

(b) are applied towards the provision of a scheme pension or a lifetime annuity,

they are to be treated as not doing so.]

Textual Amendments

F13 Sch. 28 para. 22(1)(a)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 21(2), 64(1)

F14 Sch. 28 para. 22(2)(3) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 21(3), 64(1)

Modifications etc. (not altering text)

C1 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

C2 Sch. 28 para. 22 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 30(1)-(3)

Unsecured pension year and basis amount for unsecured pension year U.K.

23 (1) “Unsecured pension year” means— U.K.

(a) the period of 12 months beginning with the day on which the dependant first becomes entitled to dependants' unsecured pension in respect of the arrangement, and

(b) each succeeding period of 12 months.

(2) But when the dependant reaches the age of 75 or dies before reaching that age, the current unsecured pension year is the last unsecured pension year and ends immediately before the dependant’s death or 75th birthday.

Modifications etc. (not altering text)

C3 Sch. 28 para. 23(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 30(1)(2)(4)

24 [F15 (1) Subject as follows, the period of five unsecured pension years beginning with the first unsecured pension year, and each succeeding period of five unsecured pension years, is a “reference period”. U.K.

(1A) 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

(b) that (subject to any further operation of this sub-paragraph) the period of five unsecured pension years beginning with that day, and each succeeding period of five unsecured pension years, is to be a reference period.

(1C) The first day of each reference period is, in relation to that period, “the reference date”.]

(2) For the first unsecured 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 dependant’s unsecured 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).

(4) For each other unsecured 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 dependant’s unsecured pension fund—

(a) if there has been no recent annuity purchase [F16 , recent additional fund designation or recent pension sharing event], on the nominated date, and

(b) otherwise, immediately after the last annuity purchase [F17 , additional fund designation or pension sharing event],

(but subject to sub-paragraph (5)).

(5) On the occasion of each additional fund designation during an unsecured pension year, the basis amount for that unsecured pension year is to be recalculated in accordance with sub-paragraph (6).

(6) The basis amount for the unsecured 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 unsecured pension fund immediately after the additional fund designation.

(7) “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 dependant’s unsecured pension fund.

(8) “Additional fund designation” means the designation under the arrangement of further sums and assets held for the purposes of the arrangement as available for the payment of unsecured dependants' pension to the dependant.

[F18 (8A) “Pension sharing event” means the coming into operation of a pension sharing order or provision relating to the sums and assets representing the dependant's unsecured pension fund.]

(9) An annuity purchase [F19 , 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 unsecured pension year.

(10) Paragraph 14 defines “relevant annuity”.

Textual Amendments

F15 Sch. 28 para. 24(1)-(1C) substituted (19.7.2007) for Sch. 28 para. 24(1) (with effect in accordance with Sch. 20 para. 24(5) of the amending Act) by Finance Act 2007 (c. 11), Sch. 20 para. 8(3)

F16 Words in Sch. 28 para. 24(4)(a) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 22(2)(a), 64(1)

F17 Words in Sch. 28 para. 24(4)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 22(2)(b), 64(1)

F18 Sch. 28 para. 24(8A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 22(3), 64(1)

F19 Words in Sch. 28 para. 24(9) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 22(4), 64(1)

Modifications etc. (not altering text)

C4 Sch. 28 para. 24 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 3, 5(1)(3)

Dependant’s alternatively secured pension fund U.K.

25 (1) For the purposes of this Part a dependant’s alternatively secured pension fund in respect of an arrangement consists of such of the sums and assets held for the purposes of the arrangement as— U.K.

(a) meet condition A or B, and

(b) have not been subsequently applied [F20 towards the provision of a dependants' scheme pension].

[F21 (2) Condition A is that they—

(a) were part of the dependant's unsecured pension fund in respect of the arrangement when the dependant reached the age of 75, or

(b) arise, or (directly or indirectly) derive, from sums or assets within paragraph (a) or which so arise or derive.

(3) Condition B is that they have at any time since the dependant reached the age of 75 been designated as available for the payment of alternatively secured dependants' pension to the dependant or arise, or (directly or indirectly) derive, from sums or assets which have been so designated or which so arise or derive.

(4) If any sums or assets representing a dependant's alternatively secured pension fund in respect of an arrangement under the pension scheme would (apart from this sub-paragraph) come to be taken to represent another dependant's alternatively secured pension fund of his under the pension scheme, or an alternatively secured pension fund of his under the pension scheme, they are to be treated as not doing so.]

Textual Amendments

F20 Words in Sch. 28 para. 25(1)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 23(2), 64(1)

F21 Sch. 28 para. 25(2)-(4) substituted for Sch. 28 para. 25(2)(3) (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 23(3), 64(1)

Modifications etc. (not altering text)

C5 Sch. 28 para. 25(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 32

Alternatively secured pension year and basis amount for alternatively secured pension year U.K.

26 (1) “Alternatively secured pension year” means— U.K.

(a) the period of 12 months beginning with the day on which the dependant first becomes entitled to alternatively secured pension in respect of the arrangement, and

(b) each succeeding period of 12 months.

(2) When the dependant dies, the current alternatively secured pension year is the last alternatively secured pension year and ends immediately before the dependant’s death.

27 (1) For the first alternatively secured 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 dependant’s alternatively secured pension fund on the date on which the dependant first became entitled to dependants' alternatively secured pension in respect of the arrangement. U.K.

(2) For each other alternatively secured 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 dependant’s alternatively secured 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 alternatively secured pension year as is nominated by the scheme administrator (but if no day is nominated by the scheme administrator, is the first day of the alternatively secured pension year).

(4) Paragraph 14 defines “relevant annuity”.