Finance Act 2004

Sections 165 and 167

SCHEDULE 28 U.K. Registered pension schemes: authorised pensions—supplementary

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

Part 1 U.K. Pension rules

Defined benefits and money purchase arrangements U.K.

Ill-health condition U.K.

1 U.K. For the purposes of this Part the ill-health condition is met if—

(a) the scheme administrator has received evidence from a registered medical practitioner that the member is (and will continue to be) incapable of carrying on the member’s occupation because of physical or mental impairment, and

(b) the member has in fact ceased to carry on the member’s occupation.

Modifications etc. (not altering text)

C2 Sch. 28 para. 1 modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

Scheme pension U.K.

2 F1 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

(2) [F2 A] pension payable to the member is a scheme pension for the purposes of this Part if—

(a) it is payable by the scheme administrator or by an insurance company selected by the scheme administrator, and

(b) it satisfies the condition in sub-paragraph (3).

(3) The condition is that (subject to sub-paragraph (4)—

(a) the pension is payable (at least annually) until the member’s death or until the later of the member’s death and the end of a term certain not exceeding ten years, and

(b) the rate of pension payable [F3 at any time during any] relevant 12 month period is not less than the rate payable [F4 at the relevant time].

[F5 (3A) “The relevant time” is—

(a) in the case of the first relevant 12 month period, the day on which the member becomes entitled to the pension, and

(b) in the case of any other relevant 12 month period, immediately before the beginning of that period.]

(4) None of the following prevent the pension satisfying the condition in sub-paragraph (3)—

[F6 (a) the reduction of the pension if the member became entitled to it by reason of the ill-health condition being met,]

(b) a reduction in the rate of the pension which applies to all the scheme pensions being paid to or in respect of members of the pension scheme, F7 ...

[F8 (c) a reduction in the rate of the pension, taking effect at a time not earlier than when the member reaches the age of 60 and not later than when the member reaches the age of 65, which does not exceed the relevant state retirement pension rate at that time (or the pension ceasing to be payable at such a time if at that time that rate is greater than the rate of the pension),]

[F9 (d) the reduction of the pension in consequence of a pension sharing order or provision,

(e) forfeiture of entitlement to the pension in circumstances prescribed by regulations made by the Board of Inland Revenue,

(f) the reduction of the pension in consequence of an order of a court,

(g) if the pension is under a public service pension scheme, its reduction by abatement, or

(h) the reduction of the pension in any other circumstances prescribed by regulations made by the Board of Inland Revenue.]

[F10 (4A) In sub-paragraph (4) references to the reduction of a pension include its ceasing to be payable (whether temporarily or permanently).]

[F11 (5) For the purposes of sub-paragraph (4)(c) “the relevant state retirement pension rate” at any time—

(a) where no employment of the member to which the pension scheme relates is or has been other than contracted-out employment by reference to the pension scheme, is 125% of the rate of the basic pension at that time or such higher percentage of that rate as the Treasury may by regulations prescribe,

(b) where no such employment of the member is or has been contracted-out employment by reference to the pension scheme, is 250% of the rate of the basic pension at that time or such higher percentage of that rate as the Treasury may by regulations prescribe, and

(c) otherwise, is such percentage of the rate of the basic pension at that time falling between the percentages for the time being specified under or by virtue of paragraphs (a) and (b) as the Treasury by regulations prescribe;

and regulations under paragraph (c) may prescribe different percentages for different cases.

(5A) For the purposes of sub-paragraph (5)—

(a) for the meaning of “contracted-out employment” see section 8(1) of the Pension Schemes Act 1993 or section 4(1) of the Pension Schemes (Northern Ireland) Act 1993, and

(b) “the basic pension” means the basic pension specified in section 44 of SSCBA 1992 or section 44 of SSCB(NI)A 1992.]

(6) A pension is payable until the end of a term certain even if it may, after the death of the member during the term, end on the pensioner—

(a) marrying,

[F12 (aa) entering into a civil partnership,]

(b) reaching the age of 18, or

(c) ceasing to be in full-time education.

[F13 (6A) The Board of Inland Revenue may by regulations provide that if—

(a) a scheme pension payable by an insurance company selected by the scheme administrator of a registered pension scheme (“the original scheme pension”) ceases to be payable, and

(b) in consequence of the transfer of sums or assets (or both) from the insurance company to another insurance company in connection with the original scheme pension ceasing to be payable, another scheme pension becomes payable by the other insurance company (“the new scheme pension”),

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.]

(7) A relevant 12 month period is any 12 month period which—

(a) begins on or after the first anniversary of the day on which the member becomes entitled to the pension, and

(b) ends before the day on which the pension ceases to be payable.

[F14 (8) Regulations under sub-paragraph [F15 (4)(e) or (h) or (5)] may include provision having effect in relation to times before they are made.]

Textual Amendments

F1 Sch. 28 para. 2(1) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 11(2), 64(1), Sch. 11 Pt. 4

F2 Word in Sch. 28 para. 2(2) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 11(3), 64(1)

F3 Words in Sch. 28 para. 2(3)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 11(4)(a), 64(1)

F4 Words in Sch. 28 para. 2(3)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 11(4)(b), 64(1)

F5 Sch. 28 para. 2(3A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 11(5), 64(1)

F6 Sch. 28 para. 2(4)(a) substituted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 7(2), 24(3)

F7 Word in Sch. 28 para. 2(4)(b) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 11(6), 64(1), Sch. 11 Pt. 4

F8 Sch. 28 para. 2(4)(c) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 20(2)

F9 Sch. 28 para. 2(4)(d)-(h) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 11(6), 64(1)

F10 Sch. 28 para. 2(4A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 11(7), 64(1)

F11 Sch. 28 para. 2(5)(5A) substituted for Sch. 28 para. 2(5) (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 20(3)

F12 Sch. 28 para. 2(6)(aa) inserted (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 2(2)

F13 Sch. 28 para. 2(6A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 11(8), 64(1)

F14 Sch. 28 para. 2(8) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 11(9), 64(1)

F15 Words in Sch. 28 para. 2(8) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 20(4)

[F16 2A (1) Where this paragraph applies in relation to a pension payable to the member, the pension scheme is to be treated as making an unauthorised payment to the member of the appropriate amount. U.K.

(2) This paragraph applies to a pension if it fails to satisfy the condition in sub-paragraph (3) of paragraph 2—

(a) by reason of not complying with paragraph (a) of that sub-paragraph, or

(b) by reason of not complying with paragraph (b) of that sub-paragraph because a substantial reduction occurs in the rate of the pension,

or if it is a pension [F17 which is reduced in accordance with paragraph (a) of sub-paragraph (4) of paragraph 2, or the rate of which is reduced in accordance with paragraph (b) of that sub-paragraph, and] the reduction is part of avoidance arrangements.

(3) For the purposes of sub-paragraph (2)(b) a substantial reduction occurs in the rate of a pension if the rate at which the pension is payable at any time during any relevant 12 month period (within the meaning of paragraph 2(7)) is less than 80% of the rate payable when the member became entitled to the pension.

(4) For the purposes of sub-paragraph (2) “avoidance arrangements” includes schemes, arrangements and understandings of any kind (whether or not legally enforceable) the main purpose, or one of the main purposes, of which is to increase the member's entitlement to a lump sum on which there is no liability to income tax.

(5) “The appropriate amount”, in relation to the pension, is the amount of any lump sum on which there is no liability to tax to which the member became entitled in connection with the pension.

(6) Once this paragraph has applied in relation to the pension, it does not apply in relation to it again.

(7) The application of this paragraph in relation to the pension does not prevent any payments of the pension themselves being unauthorised member payments.]

Textual Amendments

F16 Sch. 28 para. 2A inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 12, 64(1)

F17 Words in Sch. 28 para. 2A(2) substituted (19.7.2007) (with effect in accordance with Sch. 20 para. 24(4) of the amending Act) by Finance Act 2007 (c. 11), Sch. 20 para. 7(3)

Money purchase arrangements U.K.

Lifetime annuity U.K.

3 (1) For the purposes of this Part an annuity payable to the member is a lifetime annuity if— U.K.

(a) it is payable by an insurance company,

(b) the member had an opportunity to select the insurance company,

(c) it is payable until the member’s death or until the later of the member’s death and the end of a term certain not exceeding ten years, and

[F18 (d) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.]

(2) An annuity is payable until the end of a term certain even if it may, after the death of the member during the term, end on the annuitant—

(a) marrying,

[F19 (aa) entering into a civil partnership,]

(b) reaching the age of 18, or

(c) ceasing to be in full-time education.

[F20 (2A) An annuity does not fail to satisfy sub-paragraph (1)(d) by reason of the operation of a pension sharing order or provision.

(2B) The Board of Inland Revenue may by regulations make provision in relation to cases in which a lifetime annuity payable by an insurance company (“the original lifetime 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 lifetime annuity (a “new lifetime annuity”) or a scheme pension, short-term annuity, dependants' scheme pension, dependants' annuity or dependants' short-term annuity by the other insurance company, or

(b) sums or assets are transferred to the relevant registered pension scheme.

(2C) The regulations may provide that—

(a) in a case where a new lifetime annuity becomes payable, the new lifetime 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 lifetime annuity, and

(b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment to the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred.

[F21 (2CA) 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.]

(2D) For the purposes of sub-paragraphs (2B) and (2C) a registered pension scheme is the relevant registered pension scheme if the original lifetime annuity was acquired using sums or assets held for the purposes of the pension scheme.]

F22 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F22 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F22 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F22 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F18 Sch. 28 para. 3(1)(d) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 13(2), 64(1)

F19 Sch. 28 para. 3(2)(aa) inserted (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 2(2)

F20 Sch. 28 para. 3(2A)-(2D) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 13(3), 64(1)

F21 Sch. 28 para. 3(2CA) inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 29 para. 2(2)

F22 Sch. 28 para. 3(3)-(6) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 13(4), 64(1), Sch. 11 Pt. 4

Unsecured pension and alternatively secured pension U.K.

4 U.K. “Unsecured pension” means—

(a) a short-term annuity, or

(b) income withdrawal.

5 U.K. “Alternatively secured pension” means income withdrawal.

Short-term annuity U.K.

6 (1) [F23 For the purposes of this Part an] annuity payable to the member is a 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 member’s unsecured pension fund in respect of an arrangement,

(b) it is payable by an insurance company,

(c) the member 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 member reaches the age of 75, and

[F24 (e) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.]

[F25 (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 short-term annuity payable by an insurance company (“the original 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 short-term annuity (a “new short-term annuity”) or a scheme pension, lifetime annuity, dependants' scheme pension, dependants' annuity or dependants' short-term 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 short-term annuity becomes payable, the new 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 short-term annuity, and

(b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment to 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 short-term annuity was acquired using sums or assets held for the purposes of the pension scheme.]

F26 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F23 Words in Sch. 28 para. 6(1) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 14(2), 64(1)

F24 Sch. 28 para. 6(1)(e) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 14(3), 64(1)

F25 Sch. 28 para. 6(1A)-(1D) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 14(4), 64(1)

F26 Sch. 28 para. 6(2) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 14(5), 64(1), Sch. 11 Pt. 4

Income withdrawal U.K.

7 U.K. “Income withdrawal” means—

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

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

Member’s unsecured pension fund U.K.

8 (1) For the purposes of this Part the member’s unsecured pension fund in respect of an arrangement consists of such of the sums or assets held for the purposes of the arrangement [F27 as are member-designated funds.] U.K.

[F28 (1A) For the purposes of this Part sums or assets held for the purposes of an arrangement are member-designated funds if they—

(a) have been designated at any time under the arrangement as available for the payment of unsecured pension, or

(b) arise, or (directly or indirectly) derive, from sums or assets which have been so designated or which so arise or derive,

and have not been applied towards the provision of a scheme pension.]

(2) When the member reaches the age of 75, any relevant uncrystallised funds are to be treated as having been designated under the arrangement as available for the payment of unsecured pension immediately before the member reached that age.

(3) “Relevant uncrystallised funds” means

[F29 (a) if the arrangement is a cash balance arrangement, a sum equal to what would, on the valuation assumption in section 277(a), be available for the provision of benefits to or in respect of the member if the member became entitled to them on reaching the age of 75, and

(b) if it is not, such of the sums and assets held for the purposes of the arrangement as are not member-designated funds and have not been applied towards the provision of a scheme pension or a dependants' scheme pension.]

[F30 (4) If any sums or assets representing the member's unsecured pension fund in respect of an arrangement under the pension scheme would (apart from this sub-paragraph) come to be taken to represent another unsecured pension fund of his under the pension scheme, or a dependant's unsecured pension fund of his under the pension scheme, they are to be treated as not doing so.]

Textual Amendments

F27 Words in Sch. 28 para. 8(1) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 18(2), 64(1)

F28 Sch. 28 para. 8(1A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 18(3), 64(1)

F29 Sch. 28 para. 8(3)(a)(b) substituted for Sch. 28 para. 8(3)(a)(b) and words (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 18(4), 64(1)

F30 Sch. 28 para. 8(4) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 18(5), 64(1)

Modifications etc. (not altering text)

C3 Sch. 28 para. 8 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 29(1)-(3)

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

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

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

(b) each succeeding period of 12 months.

(2) But when the member 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 member’s death or 75th birthday.

Modifications etc. (not altering text)

C4 Sch. 28 para. 9(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 29(1)(2)(4)

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

10 [F31 (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 member notifies the scheme administrator that the member 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 member’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 member’s unsecured pension fund—

(a) if there has been no recent annuity purchase [F32 , recent additional fund designation or recent pension sharing event], on the nominated date, and

(b) otherwise, immediately after the last annuity purchase [F33 , 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 member’s unsecured pension fund immediately after the additional fund designation.

(7) “Annuity purchase” means the purchase of a scheme pension or a lifetime annuity by the application of sums or assets representing the whole or part of the member’s unsecured pension fund.

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

[F34 (8A) “Pension sharing event” means the coming into operation of a pension sharing order or provision relating to the sums and assets representing the member's unsecured pension fund.]

(9) An annuity purchase [F35 , 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

F31 Sch. 28 para. 10(1)-(1C) substituted (19.7.2007) for Sch. 28 para. 10(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(2)

F32 Words in Sch. 28 para. 10(4)(a) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 19(2)(a), 64(1)

F33 Words in Sch. 28 para. 10(4)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 19(2)(b), 64(1)

F34 Sch. 28 para. 10(8A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 19(3), 64(1)

F35 Words in Sch. 28 para. 10(9) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 19(4), 64(1)

Modifications etc. (not altering text)

C5 Sch. 28 para. 10 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 3, 5(1)(2)

Member’s alternatively secured pension fund U.K.

11 (1) For the purposes of this Part the member’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 condition B, and

(b) have not been subsequently applied [F36 towards the provision of a scheme pension].

[F37 (2) Condition A is that they—

(a) were part of the member's unsecured pension fund in respect of the arrangement when the member 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—

(a) became held for the purposes of the arrangement after the member reached the age of 75 or arise, or (directly or indirectly) derive, from sums or assets which became so held or which so arise or derive, or

(b) if the arrangement is a relevant arrangement, have at any time since the member reached that age been designated as available for the payment of alternatively secured pension to the member or arise, or (directly or indirectly) derive, from sums or assets which have been so designated or which so arise or derive.]

(4) A relevant arrangement is an arrangement which became a money purchase arrangement after the member reached the age of 75 (having previously been a hybrid arrangement under which, in certain circumstances, defined benefits were payable).

[F38 (5) If any sums or assets representing the member'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 alternatively secured pension fund of his under the pension scheme, or a dependant's alternatively secured pension fund of his under the pension scheme, they are to be treated as not doing so.]

[F39 (6) Sub-paragraph (7) applies if—

(a) at the time when the member reaches the age of 75, the scheme administrator has been unable to ascertain the member's whereabouts after having taken all reasonable steps to do so, and

(b) paragraph 8(2) applies in relation to the member and the arrangement and none of the sums or assets held for the purposes of the arrangement are member-designated funds immediately before it applies.

(7) In that case the references in sub-paragraphs (2) and (3) to the time when the member reached the age of 75 are to be read as referring to the end of the period of six months beginning with any later date on which the member's whereabouts are subsequently ascertained by the scheme administrator.]

Textual Amendments

F36 Words in Sch. 28 para. 11(1)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 20(2), 64(1)

F37 Sch. 28 para. 11(2)(3) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 20(3), 64(1)

F38 Sch. 28 para. 11(5) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 20(4), 64(1)

F39 Sch. 28 para. 11(6)(7) inserted (retrospective to 6.4.2006) by Finance Act 2007 (c. 11), Sch. 19 paras. 11, 29(4)

Modifications etc. (not altering text)

C6 Sch. 28 para. 11 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 31(4)-(6)

C7 Sch. 28 para. 11 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 31(1)-(3)

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

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

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

(b) each succeeding period of 12 months.

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

F40 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F41 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F40 Sch. 28 para. 12(3) repealed (19.7.2007) (with effect in accordance with Sch. 19 para. 29(1) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 3, Sch. 27 Pt. 3(1)

F41 Sch. 28 para. 12(4) repealed (19.7.2007) (with effect in accordance with Sch. 19 para. 29(1) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 3, Sch. 27 Pt. 3(1)

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

13 (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 member’s alternatively secured pension fund on the date on which the member first became entitled to 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 member’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 (or, 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”.

Relevant annuity U.K.

14 (1) A “relevant annuity”is an annuity of a description prescribed by regulations made by the Board of Inland Revenue. U.K.

(2) The annual amount of a relevant annuity is to be ascertained in accordance with regulations made by the Board of Inland Revenue.

(3) The regulations may in particular provide for the annual amount to be ascertained by reference to—

(a) comparative annuity tables published by the Financial Services Authority, or

(b) material published by any other person.

Part 2 U.K. Pension death benefit rules

Defined benefits and money purchase arrangements U.K.

Meaning of “dependant” U.K.

15 (1) A person who was married to [F42 , or a civil partner of,] the member at the date of the member’s death is a dependant of the member. U.K.

[F43 (1A) If the rules of the pension scheme so provide, a person who was married to [F44 , or a civil partner of,] the member when the member first became entitled to a pension under the pension scheme is a dependant of the member.]

(2) A child of the member is a dependant of the member if the child—

(a) has not reached the age of 23, or

(b) has reached that age and, in the opinion of the scheme administrator, was at the date of the member’s death dependant on the member because of physical or mental impairment.

(3) A person who was not married to [F45 , or a civil partner of,] the member at the date of the member’s death and is not a child of the member is a dependant of the member if, in the opinion of the scheme administrator, at the date of the member’s death—

(a) the person was financially dependant on the member,

(b) the person’s financial relationship with the member was one of mutual dependence, or

(c) the person was dependant on the member because of physical or mental impairment.

Textual Amendments

F42 Words in Sch. 28 para. 15(1) inserted (with effect in accordance with reg. 1(7) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 180(a)

F43 Sch. 28 para. 15(1A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 26, 64(1)

F44 Words in Sch. 28 para. 15(1A) inserted (with effect in accordance with reg. 1(7) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 180(b)

F45 Words in Sch. 28 para. 15(3) inserted (with effect in accordance with reg. 1(7) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 180(c)

Modifications etc. (not altering text)

C8 Sch. 28 para. 15(2) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 34

C9 Sch. 28 para. 15(2)(b) modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

C10 Sch. 28 para. 15(3) modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

Dependants' scheme pension U.K.

16 F46 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

(2) [F47 A] pension payable to a dependant is a dependants' scheme pension [F48 for the purposes of this Part] if—

(a) it is payable by the scheme administrator or by an insurance company selected by the scheme administrator, F49 ...

F49 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F50 (2A) The Board of Inland Revenue may by regulations make provision in relation to cases in which a dependants' scheme pension payable to a dependant of a member of a registered pension scheme by an insurance company (“the original dependants' scheme pension”) 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' scheme pension (a “new dependants' scheme pension”) or a scheme pension, lifetime annuity, short-term annuity, dependants' annuity or dependants' short-term annuity by the other insurance company, or

(b) sums or assets are transferred to the relevant registered pension scheme.

(2B) The regulations may provide that—

(a) in a case where a new dependants' scheme pension becomes payable, 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, 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.

(2C) For the purposes of sub-paragraphs (2A) and (2B) a registered pension scheme is the relevant registered pension scheme if the original dependants' scheme pension was acquired using sums or assets held for the purposes of the pension scheme.]

F51 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F51 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F51 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F51 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F46 Sch. 28 para. 16(1) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 27(2), 64(1), Sch. 11 Pt. 4

F47 Word in Sch. 28 para. 16(2) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 27(3)(a), 64(1)

F48 Words in Sch. 28 para. 16(2) inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 28 para. 5

F49 Sch. 28 para. 16(2)(b) and word repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 27(3)(b), 64(1), Sch. 11 Pt. 4

F50 Sch. 28 para. 16(2A)-(2C) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 27(4), 64(1)

F51 Sch. 28 para. 16(3)-(6) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 27(5), 64(1), Sch. 11 Pt. 4

[F52 16A (1) Paragraphs 16B and 16C apply where— U.K.

(a) the member dies after 5th April 2006,

(b) he has reached the age of 75 before his death, and

(c) at the time of his death he is actually or prospectively entitled to one or more scheme pensions under the pension scheme.

(2) References in this paragraph and paragraph 16B to a scheme pension include a pension payable before 6th April 2006 which would be a scheme pension if payable after that date.

Textual Amendments

F52 Sch. 28 paras. 16A-16C inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 28, 64(1)

Modifications etc. (not altering text)

C11 Sch. 28 para. 16A modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 24

16B (1) Where a pension is payable under the pension scheme to a dependant of the member in the period of 12 months beginning with the date of the member's death (“the post-death year”), so much of the pension as exceeds the initial member pension limit is not a dependants' scheme pension. U.K.

(2) But if—

(a) more than one pension is so payable to one of the dependants of the member in the post-death year, or

(b) pensions are so payable to more than one dependant of the member in the post-death year,

(or both), so much of any of the pensions as exceeds the appropriate portion of the initial member pension limit is not a dependants' scheme pension.

(3) The “initial member pension limit” is (subject to sub-paragraph (4)) the sum of—

(a) the aggregate of the amounts of the scheme pensions to which the member is actually entitled under the pension scheme immediately before his death payable to the member in the period of 12 months ending with the date of his death (“the pre-death year”),

(b) the aggregate of the amounts of the scheme pensions to which the member is prospectively entitled under the pension scheme at that time which would have been so payable if he had been actually entitled to the pensions throughout the pre-death year, and

(c) 5% of the aggregate of the amounts of the lump sums on which there is no liability to income tax to which the member has become entitled in connection with scheme pensions under the pension scheme before his death.

(4) But if the member became (actually) entitled to a scheme pension under the pension scheme during the pre-death year, sub-paragraph (3)(a) has effect as if the amount of that scheme pension which was payable to the member under the pension scheme in the pre-death year were the amount which would have been payable to him in the period of 12 months beginning with the date on which he became entitled to it had he not died.

(5) The “appropriate portion” of the initial member pension limit, in relation to any pension payable under the pension scheme to a dependant of the member in the post-death year, is—

where—

P is the amount of that pension payable in the post-death year, and

AP is the aggregate of the amounts of each of the pensions payable under the pension scheme to dependants of the member in the post-death year.

Textual Amendments

F52 Sch. 28 paras. 16A-16C inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 28, 64(1)

16C (1) Where a pension is payable under the pension scheme to a dependant of the member, otherwise than in excepted circumstances, in— U.K.

(a) the period of 12 months beginning with the end of the post-death year, or

(b) any succeeding period of 12 months,

(“the 12 months in question”), so much of the pension as exceeds the current member pension limit is not a dependants' scheme pension.

(2) But if—

(a) more than one pension is so payable to one of the dependants in the 12 months in question, or

(b) pensions are so payable to more than one dependant of the member in the 12 months in question,

(or both), so much of any of the pensions as exceeds the appropriate portion of the current member pension limit is not a dependants' scheme pension.

(3) “Excepted circumstances” means—

(a) that at the beginning of the period of 12 months in question there are at least 50 pensioner members of the pension scheme, and

(b) that the condition in subsection (4) is met.

(4) The condition in this subsection is met if —

(a) the difference between CYP and PYP in the case of each relevant existing pension is the same amount,

(b) the difference between CYP and PYP in the case of each relevant existing pension is the same percentage of PYP, or

(c) in the case of each relevant existing pension the difference between CYP and PYP is the aggregate of a percentage of PYP and an amount which are both the same as those the aggregate of which make up the difference between CYP and PYP in the case of each other relevant existing pension.

(5) In this section—

• “relevant existing pension” means a pension payable to any dependant of any member under the pension scheme throughout the 12 months in question and the immediately preceding period of 12 months,

• “CYP”, in relation to a relevant existing pension, is the current year pension, that is the amount of the pension payable in the 12 months in question, and

• “PYP”, in relation to a relevant existing pension, is the previous year pension, that is the amount of the pension payable in the immediately preceding period of 12 months.

(6) The “current member pension limit”, in relation to the 12 month period in question, is the initial member pension limit increased by the aggregate of—

(a) the permitted margin, and

(b) the excepted circumstances amount.

(7) The “permitted margin” is the amount by which the initial member pension limit would be greater if it had been increased by whichever of calculation A and calculation B gives the greater amount.

(8) Calculation A involves increasing the initial member pension limit by the relevant annual percentage rate for the whole of the period—

(a) beginning with the first month beginning after the end of the post-death year (“the opening month”), and

(b) ending with the first month of the 12 months in question (“the closing month”).

(9) The relevant annual percentage rate is—

(a) if the relevant valuation factor in relation to the pension scheme is a number greater than 20, the annual rate agreed by the Inland Revenue and the scheme administrator, and

(b) otherwise, 5% per annum.

(10) Calculation B involves increasing the initial member pension limit by the relevant indexation percentage.

(11) If the retail prices index for the closing month is higher than it was for the opening month, the relevant indexation percentage is the percentage increase in the retail prices index.

(12) If it is not, the relevant indexation percentage is 0%.

(13) The “excepted circumstances amount” is the aggregate of the amounts of the relevant increases in pensions which were payable under the pension scheme to dependants of the member in excepted circumstances in any period or periods within subsection (1)(a) or (b).

(14) The relevant increase in the case of any pension payable in relation to any 12 month period under the pension scheme to a dependant of the member is the difference between CYP and PYP (for this purpose reading the references in subsection (5) to the 12 months in question as references to the 12 month period).

(15) The “appropriate portion” of the current member pension limit, in relation to any pension payable under the pension scheme to a dependant of the member in the 12 months in question, is—

where—

P is the amount of that pension payable in the 12 months in question, and

AP is the aggregate of the amounts of each of the pensions payable under the pension scheme to one or more dependants of the member in the 12 months in question.]

Textual Amendments

F52 Sch. 28 paras. 16A-16C inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 28, 64(1)

Money purchase arrangements U.K.

Dependants' annuity U.K.

17 (1) [F53 For the purposes of this Part an] annuity payable to a dependant is a dependants' annuity if— U.K.

[F54 (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,

[F55 (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[F56 , 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[F57 , entering into a civil partnership], ceasing to be a dependant or dying.

[F58 (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.]

[F59 (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.

[F60 (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

F53 Words in Sch. 28 para. 17(1) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 15(2), 64(1)

F54 Sch. 28 para. 17(1)(za) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 29(2), 64(1)

F55 Sch. 28 para. 17(1)(c) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 15(3), 64(1)

F56 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)

F57 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)

F58 Sch. 28 para. 17(1A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 29(3), 64(1)

F59 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)

F60 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) [F61 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

[F62 (e) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.]

[F63 (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.]

F64 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F61 Words in Sch. 28 para. 20(1) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(2), 64(1)

F62 Sch. 28 para. 20(1)(e) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(3), 64(1)

F63 Sch. 28 para. 20(1A)-(1D) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(4), 64(1)

F64 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.

[F65 (a) as are dependant-designated funds, and

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

[F66 (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

F65 Sch. 28 para. 22(1)(a)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 21(2), 64(1)

F66 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)

C12 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)

C13 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 [F67 (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 [F68 , recent additional fund designation or recent pension sharing event], on the nominated date, and

(b) otherwise, immediately after the last annuity purchase [F69 , 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.

[F70 (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 [F71 , 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

F67 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)

F68 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)

F69 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)

F70 Sch. 28 para. 24(8A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 22(3), 64(1)

F71 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)

C14 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 [F72 towards the provision of a dependants' scheme pension].

[F73 (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

F72 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)

F73 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)

C15 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”.