SCHEDULES
C12SCHEDULE 28Registered pension schemes: authorised pensions—supplementary
Part 2Pension death benefit rules
Money purchase arrangements
17
1
F2For the purposes of this Part an annuity payable to a dependant is a dependants' annuity if—
F55za
either—
i
it is purchased together with a lifetime annuity payable to the member and the member becomes entitled to that lifetime annuity before 6 April 2015, or
ii
it is purchased after the member's death and the dependant becomes entitled to it before 6 April 2015,
a
it is payable by an insurance company,
b
the member or dependant had an opportunity to select the insurance company,
F3c
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 marryingF15, 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 marryingF16, entering into a civil partnership, ceasing to be a dependant or dying.
F571ZA
For the purposes of this Part, but subject to any provision made under sub-paragraph (4)(za), an annuity payable to a dependant is also a dependants' annuity if—
a
either—
i
it is purchased together with a lifetime annuity payable to the member and the member becomes entitled to that lifetime annuity on or after 6 April 2015, or
ii
it is purchased after the member's death and the dependant becomes entitled to it on or after 6 April 2015,
b
it is payable by an insurance company,
c
where the dependant is not the member's child, it is payable until the dependant's death or until the earliest of the dependant's marrying, entering into a civil partnership or dying, and
d
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, entering into a civil partnership, ceasing to be a dependant or dying.
F41A
For the purposes of F56sub-paragraphs (1)(za) and (1ZA)(a) a dependants' annuity is purchased together with a lifetime annuity if the dependant's annuity is related to the lifetime annuity.
F12
An annuity does not fail to satisfy sub-paragraph (1)(c) by reason of the operation of
F80b
an order under section 377A of the Financial Services and Markets Act 2000 (court order writing down liabilities of insurer).
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—
F58za
in a case where—
i
a new annuity becomes payable,
ii
the dependant becomes entitled to it on or after 6 April 2015,
iii
it would be a dependants' annuity if any provision made under this paragraph were ignored,
iv
the terms of the contract for it are such that there will or could be decreases in its amount other than allowed decreases (see sub-paragraph (6)), and
v
any other conditions prescribed by the regulations are met,
the new annuity is not a dependants' annuity for the purposes of this Part,
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 F59a case other than one where a new dependants' annuity becomes payable, 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.
F184A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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.
F606
In sub-paragraph (4)(za)(iv) “allowed decreases” means decreases from time to time allowed by regulations under sub-paragraph (1)(c); and any such regulations are to be treated as having effect for this purpose.
18
F51“Dependants' drawdown pension” means—
a
a dependants' short-term annuity, or
b
dependants' income withdrawal.
F5219
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C1120
1
F6For the purposes of this Part an annuity payable to a dependant is a dependants' short-term annuity if—
a
it is purchased by the application of sums or assets representing the whole or any part of the F44dependant's drawdown 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,
F61ca
the dependant becomes entitled to it before 6 April 2015,
d
it is payable for a term which does not exceed five years and ends before the dependant F45... dies, and
F7e
its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.
F651ZA
For the purposes of this Part, but subject to any provision made under sub-paragraph (1C)(za), an annuity payable to a dependant is also a dependants' short-term annuity if—
a
it is purchased by the application of sums or assets representing the whole or any part of the dependant's drawdown pension fund, or of the dependant's flexi-access drawdown fund, in respect of an arrangement,
b
it is payable by an insurance company,
c
the dependant becomes entitled to it on or after 6 April 2015, and
d
it is payable for a term which does not exceed five years and ends before the dependant dies.
F51A
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—
F63za
in a case where—
i
a new annuity becomes payable,
ii
the dependant becomes entitled to it on or after 6 April 2015,
iii
it would be a dependants' short-term annuity if any provision made under this paragraph were ignored,
iv
the terms of the contract for it are such that there will or could be decreases in its amount other than allowed decreases (see sub-paragraph (1E)), and
v
any other conditions prescribed by the regulations are met,
the new annuity is not a dependants' short-term annuity for the purposes of this Part,
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 F62a case other than one where a new dependants' short-term annuity becomes payable, 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.
F641E
In sub-paragraph (1C)(za)(iv) “allowed decreases” means decreases from time to time allowed by regulations under sub-paragraph (1)(e); and any such regulations are to be treated as having effect for this purpose.
F82
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F5321
Dependants' income withdrawal” means an amount (other than an annuity) which the dependant is entitled to be paid from the dependant's drawdown pension fund in respect of an arrangement F66or from the dependant's flexi-access drawdown fund in respect of an arrangement.
C322
1
For the purposes of this Part a F36dependant's drawdown pension fund in respect of an arrangement consists of such of the sums and assets held for the purposes of the arrangement—
F10a
as are dependant-designated funds, and
b
have not been applied towards the provision of a dependants' scheme pension.
C6F92
For the purposes of this Part sums or assets held for the purposes of an arrangement are dependant-designated funds if F67...—
a
F69aa
they have, at any time on or after 6 April 2015, been designated under the arrangement as available for the payment of dependants' drawdown pension F77..., and—
i
sums or assets held for the purposes of the arrangement have, at any time before 6 April 2015, been designated under the arrangement as so available, and
ii
section 167(2A) did not apply to the arrangement immediately before 6 April 2015, or
3
If any sums or assets representing a F76person'sF37dependant's drawdown pension fund in respect of an arrangement under the pension scheme would (apart from this sub-paragraph)—
a
b
are applied towards the provision of a scheme pension or a lifetime annuity,
they are to be treated as not doing so.
22A
1
For the purposes of this Part a dependant's flexi-access drawdown fund in respect of an arrangement consists of such of the sums or assets held for the purposes of the arrangement as are newly-designated dependant funds.
2
For the purposes of this Part sums or assets held for the purposes of an arrangement are newly-designated dependant funds if—
a
they—
i
have, at any time on or after 6 April 2015, been designated under the arrangement as available for the payment of dependants' drawdown pension, and
ii
are not dependant-designated funds, or
b
they were dependant-designated funds immediately before 6 April 2015 and section 167(2A) applied to the arrangement at that time, or
c
they have become newly-designated dependant funds by the operation of paragraph 22B, 22C or 22D, or
d
they arise, or (directly or indirectly) derive, from newly-designated dependant funds under paragraph (a), (b) or (c) or from sums or assets which so arise or derive.
3
Any sums or assets that become newly-designated dependant funds under sub-paragraph (2)(b) cease to be dependant-designated funds as from the start of 6 April 2015.
22B
1
Sub-paragraph (2) applies if—
a
a dependant's drawdown pension fund in respect of an arrangement came into being before 6 April 2015,
b
section 167(2A) did not apply to the arrangement immediately before 6 April 2015, and
c
at a time on or after 6 April 2015, a payment—
i
of dependants' income withdrawal from the fund, or
ii
of a dependants' short-term annuity purchased using sums or assets out of the fund,
is made that (apart from sub-paragraph (2)) would breach the cap.
2
The sums and assets that make up the fund immediately before the payment is made become newly-designated dependant funds immediately before the payment is made (so that the payment is made out of the dependant's flexi-access drawdown fund in respect of the arrangement and therefore is not part of the total capped by pension death benefit rule 4).
3
For the purposes of sub-paragraph (1)(c), a payment of dependants' drawdown pension in respect of an arrangement is one that would breach the cap if, when its amount is added to the amounts of any dependants' drawdown pension in respect of the arrangement—
a
paid—
i
before it is made, but
ii
in the same drawdown pension year in respect of the arrangement, or
b
paid at the time it is made,
the total is greater than the cap set by pension death benefit rule 4 for that drawdown pension year.
22C
1
Sub-paragraph (2) applies if—
a
a dependant's drawdown pension fund in respect of an arrangement came into being before 6 April 2015,
b
section 167(2A) did not apply to the arrangement immediately before 6 April 2015, and
c
the dependant notifies the F73scheme manager that the dependant wishes the fund to become the dependant's flexi-access drawdown fund in respect of the arrangement.
2
At—
a
the time the F73scheme manager accepts the notification, or
b
the start of 6 April 2015 if that is later,
the sums and assets that then make up that fund become newly-designated dependant funds, if they have not previously done so by the operation of paragraph 22B.
22D
1
Sub-paragraphs (2) and (3) apply if—
a
there is a recognised transfer from one registered pension scheme (“the old scheme”) to another registered pension scheme (“the new scheme”) of dependant-designated funds held for the purposes of an arrangement under the old scheme, and
b
the sums or assets transferred are, under the arrangement under the new scheme for whose purposes they are first held after the transfer, designated as available for the payment of drawdown pension.
2
If the dependant, when or before the designation is made, notifies the F73scheme manager of the new scheme that the dependant wishes the sums or assets to be newly-designated dependant funds, the sums or assets become newly-designated dependant funds and do so—
a
when the designation is made, or
b
if later, immediately after the transfer,
except that, if both the designation and transfer are made before 6 April 2015, the sums or assets become newly-designated dependant funds at the start of 6 April 2015.
3
If sub-paragraph (2) does not provide for the sums or assets to become newly-designated dependant funds, the sums or assets become dependant-designated funds and do so—
a
when the designation is made, or
b
if later, immediately after the transfer.
23
C21
F40“Drawdown pension year” means—
C10C7a
the period of 12 months beginning with the day on which the dependant first becomes entitled to F43dependants' drawdown pension in respect of the arrangement, and
b
each succeeding period of 12 months.
F41This is subject to paragraph 24B.
C4F422
The drawdown pension year in which the dependant dies is the last drawdown pension year and ends immediately before the dependant's death.
C1C824
F19A1
This paragraph applies in relation to drawdown pension years beginning on or before the dependant's 75th birthday.
1
Subject as follows, the period of three drawdown pension years beginning with the first drawdown pension year, and each succeeding period of three drawdown pension years, is a “reference period”.
1ZA
But the reference period in which the dependant reaches the age of 75 ends with the drawdown pension year in which the dependant reaches that age.
F171A
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
1C
The first day of each reference period is, in relation to that period, “the reference date”.
2
For the first F26drawdown 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 F27dependant's drawdown 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).
C94
For each other F21drawdown 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 F22dependant's drawdown pension fund—
a
if there has been no recent annuity purchaseF12, recent additional fund designation or recent pension sharing event, on the nominated date, and
b
otherwise, immediately after the last annuity purchaseF13, additional fund designation or pension sharing event,
(but subject to sub-paragraph (5)).
5
6
F206A
But sub-paragraph (5) does not apply where the operation of that sub-paragraph in relation to an additional fund designation during a drawdown pension year would reduce the basis amount for that drawdown pension year.
C57
“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 F32dependant's drawdown pension fund.
C58
C5F118A
“Pension sharing event” means the coming into operation of a pension sharing order or provision relating to the sums and assets representing the F23dependant's drawdown pension fund.
9
An annuity purchaseF14, 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 F35drawdown pension year.
10
Paragraph 14 defines “relevant annuity”.
F7411
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4724A
1
This paragraph applies in relation to drawdown pension years beginning after the dependant's 75th birthday.
2
For each drawdown pension year beginning after the dependant reached the age of 75, 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 drawdown 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 drawdown pension year as is nominated by the scheme administrator (or, if no day is nominated by the scheme administrator, is the first day of that year).
4
On the occasion of each additional fund designation during a drawdown pension year, the basis amount of that drawdown pension year is to be recalculated in accordance with sub-paragraph (5).
5
The basis amount for the drawdown 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 drawdown pension fund immediately after the additional fund designation.
6
But sub-paragraph (4) does not apply where the operation of that sub-paragraph in relation to an additional fund designation during a drawdown pension year would reduce the basis amount for that drawdown pension year.
7
“Additional fund designation” has the meaning given by paragraph 24(8).
8
Paragraph 14 defines “relevant annuity”.
F759
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24B
1
This paragraph applies if the dependant has reached the age of 75.
2
Sub-paragraph (3) applies if, at any time during a drawdown pension year in respect of an arrangement (“the current drawdown pension year”), the dependant notifies the scheme administrator that the dependant wishes the drawdown pension year following the current drawdown pension year to begin on the day on which the next drawdown pension year in respect of another arrangement relating to the dependant under the pension scheme (including any arrangement relating to that person as a member of the scheme) will begin.
3
The scheme administrator may determine—
a
that the current drawdown pension year is to end immediately before that day, and
b
that the period of 12 months beginning with that day, and each succeeding period of 12 months, is a drawdown pension year in respect of the arrangement.
4
The scheme administrator may not make a determination under this paragraph more than once in relation to the same arrangement.
F7224C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F7224D
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F7224E
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F7224F
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F7224G
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4625
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sch. 28 modified by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (S.I. 2006/207), regs. 1(1), 14 (as substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by S.I. 2012/1795, regs. 1(1), 5)