Finance Act 2004

Part 2 U.K. Lump sum death benefit rule

Modifications etc. (not altering text)

C3 Sch. 29 Pt. 2 applied (with modifications) (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 14

C4 Sch. 29 Pt. 2 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 6, 8(1)(3)

Defined benefits arrangements U.K.

Defined benefits lump sum death benefit U.K.

13 [F1 (1)] For the purposes of this Part a lump sum death benefit is a defined benefits lump sum death benefit if— U.K.

F2 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) it is paid in respect of a defined benefits arrangement,

F3 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and

(d) it is not a pension protection lump sum death benefit, trivial commutation lump sum death benefit or winding-up lump sum death benefit.

[F4 But, in a case where the member had not reached the age of 75 at the date of the member’s death, a lump sum death benefit is a defined benefits lump sum death benefit only if it is paid before the end of the relevant two-year period.]

[F5 (2) The relevant two-year period” means the period of two years beginning with the earlier of the day on which the scheme administrator first knew of the member’s death and the day on which the scheme administrator could first reasonably be expected to have known of it.]

Textual Amendments

F1 Sch. 29 para. 13 renumbered as Sch. 29 para. 13(1) (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 33(2)

F2 Sch. 29 para. 13(1)(a) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 33(3)(a)

F3 Sch. 29 para. 13(1)(c) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 33(3)(b)

F4 Words in Sch. 29 para. 13(1) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 33(3)(c)

F5 Sch. 29 para. 13(2) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 33(4)

Pension protection lump sum death benefit U.K.

14 (1) For the purposes of this Part a lump sum death benefit is a pension protection lump sum death benefit if— U.K.

F6 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) it is paid in respect of a defined benefits arrangement,

(c) it is paid in respect of a scheme pension to which the member was entitled at the date of the member’s death, and

(d) the member has specified that it is to be treated as a pension protection lump sum death benefit (instead of a defined benefits lump sum death benefit).

(2) But if the amount of a lump sum falling within sub-paragraph (1) exceeds the pension protection limit, the excess is not a pension protection lump sum death benefit.

(3) The pension protection limit is—

where—

[F7 AC is—

a

in a case where the member became entitled to the pension before reaching the age of 75, the amount crystallised by reason of the member becoming entitled to the pension, and

b

in a case where the member became entitled to the pension after having reached that age, the amount that would have been so crystallised but for paragraph 2 of Schedule 32,]

AP is the amount of the pension paid in respect of the period between the member becoming entitled to the pension and the member’s death, and

TPLS is the total amount of pension protection lump sum death benefit previously paid in respect of the pension under this paragraph.

Textual Amendments

F6 Sch. 29 para. 14(1)(a) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 34(2)

F7 Words in Sch. 29 para. 14(3) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 34(3)

Modifications etc. (not altering text)

C5 Sch. 29 para. 14(3) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 33(1)(2)(4)

Money purchase arrangements U.K.

Uncrystallised funds lump sum death benefit U.K.

15 (1) For the purposes of this Part a lump sum death benefit is an uncrystallised funds lump sum death benefit if— U.K.

F8 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) it is paid in respect of a money purchase arrangement,

F9 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) it is paid in respect of relevant uncrystallised funds[F10 , and

(e) it is not a charity lump sum death benefit.]

[F11 But, in a case where the member had not reached the age of 75 at the date of the member’s death, a lump sum death benefit is an uncrystallised funds lump sum death benefit only if it is paid before the end of the relevant two-year period.]

[F12 (1A) The relevant two-year period” means the period of two years beginning with the earlier of the day on which the scheme administrator first knew of the member’s death and the day on which the scheme administrator could first reasonably be expected to have known of it.]

(2) “Relevant uncrystallised funds” means such of the sums and assets held for the purposes of the arrangement at the member’s death as—

(a) had not been applied for purchasing a scheme pension, a lifetime annuity, a dependants' scheme pension or a dependants' annuity, and

(b) had not been designated under the arrangement as available for the payment of [F13 drawdown pension].

(3) But if an amount falling within sub-paragraph (1) exceeds the permitted maximum, the excess is not an uncrystallised funds lump sum death benefit.

(4) The permitted maximum is the aggregate of—

(a) the amount of the sums, and

(b) the market value of the assets,

which constitute the relevant uncrystallised funds immediately before the payment is made.

Textual Amendments

F8 Sch. 29 para. 15(1)(a) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 35(2)(a)

F9 Sch. 29 para. 15(1)(c) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 35(2)(a)

F10 Sch. 29 para. 15(1)(e) and word inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 35(2)(b)

F11 Words in Sch. 29 para. 15(1) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 35(2)(c)

F12 Sch. 29 para. 15(1A) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 35(3)

F13 Words in Sch. 29 para. 15(2)(b) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 79(4)

Annuity protection lump sum death benefit U.K.

16 (1) For the purposes of this Part a lump sum death benefit is an annuity protection lump sum death benefit if— U.K.

F14 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) it is paid in respect of a money purchase arrangement, and

(c) it is paid in respect of a scheme pension or lifetime annuity to which the member was entitled at the date of the member’s death.

(2) But if the amount of a lump sum falling within sub-paragraph (1) exceeds the annuity protection limit, the excess is not an annuity protection lump sum death benefit.

(3) The annuity protection limit is—

where—

[F15 AC is—

a

in a case where the member became entitled to the pension or annuity before reaching the age of 75, the amount crystallised by reason of the member becoming entitled to the pension or annuity, disregarding paragraphs 3 and 4 of Schedule 32, and

b

in a case where the member became entitled to the pension or annuity after having reached that age, the amount that would have been so crystallised (disregarding those paragraphs) but for paragraph 2 of that Schedule,]

AP is the amount of the pension paid in respect of the period between the member becoming entitled to the pension or annuity and the member’s death, and

TPLS is the total amount of annuity protection lump sum death benefit previously paid in respect of the pension or annuity under this paragraph.

Textual Amendments

F14 Sch. 29 para. 16(1)(a) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 36(2)

F15 Words in Sch. 29 para. 16(3) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 36(3)

Modifications etc. (not altering text)

C6 Sch. 29 para. 16(3) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 33(1)(2)(5)

[F16 Drawdown pension fund lump sum death benefit] U.K.

Textual Amendments

F16 Sch. 29 para. 17 cross-heading substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 37(6)

17 [F17 (1) For the purposes of this Part a lump sum death benefit is a drawdown pension fund lump sum death benefit if— U.K.

(a) it is paid in respect of income withdrawal to which the member was entitled under an arrangement at the date of the member's death, and

(b) it is not a charity lump sum death benefit.]

(2) A lump sum death benefit is also [F18 a drawdown pension fund lump sum death benefit] if—

(a) it is paid on the death of a dependant of the member,

F19 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) it is paid in respect of dependants' income withdrawal to which the dependant was entitled at the date of the dependant’s death in respect of an arrangement relating to the member[F20 , and

(d) it is not a charity lump sum death benefit.]

(3) But if the amount of a lump sum falling within sub-paragraph (1) or (2) exceeds the permitted maximum, the excess is not [F21 a drawdown pension fund lump sum death benefit].

(4) The permitted maximum is the aggregate of—

(a) the amount of the sums, and

(b) the market value of the assets,

representing the member’s or dependant’s [F22 drawdown pension fund] in respect of the arrangement immediately before the payment is made.

Textual Amendments

F17 Sch. 29 para. 17(1) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 37(2)

F18 Words in Sch. 29 para. 17(2) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 37(3)(a)

F19 Sch. 29 para. 17(2)(b) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 37(3)(b)

F20 Sch. 29 para. 17(2)(d) and word inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 37(3)(c)

F21 Words in Sch. 29 para. 17(3) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 37(4)

F22 Words in Sch. 29 para. 17(4) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 37(5)

Modifications etc. (not altering text)

C7 Sch. 29 para. 17 modified (27.7.2010) by Finance (No. 2) Act 2010 (c. 31), Sch. 3 para. 2(1)(2)(e) (with Sch. 2 para. 2(1)

Charity lump sum death benefit U.K.

18 (1) A lump sum death benefit is a charity lump sum death benefit if— U.K.

F23 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) there are no dependants of the member,

(c) it is paid [F24 in respect of the member's drawdown pension fund] in respect of an arrangement at the date of the member’s death, and

(d) it is paid to a charity nominated by the member F25 ....

[F26 (1A) A lump sum death benefit is also a charity lump sum death benefit if—

(a) the member had reached the age of 75 at the date of the member's death,

(b) there are no dependants of the member,

(c) it is paid in respect of relevant uncrystallised funds in respect of a money purchase arrangement at the date of the member's death, and

(d) it is paid to a charity nominated by the member.

(1B) “Relevant uncrystallised funds” has the meaning given by paragraph 15(2).]

(2) A lump sum death benefit is also a charity lump sum death benefit if—

(a) it is paid on the death of a dependant of the member,

F27 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(c) there are no other dependants of the member,

(d) it is paid in respect of [F28 the dependant's drawdown pension fund] at the date of the dependant’s death in respect of an arrangement relating to the member, and

(e) it is paid to a charity nominated by the member [F29 or, if the member made no nomination, by the dependant F30 ....]

(3) But if the amount of a lump sum falling within sub-paragraph (1) or (2) exceeds the permitted maximum, the amount of the excess is not a charity lump sum death benefit.

(4) The permitted maximum is the aggregate of—

(a) the amount of the sums, and

(b) the market value of the assets,

[F31 representing what is the member's or dependant's drawdown pension fund] in respect of the arrangement immediately before the payment is made.

Textual Amendments

F23 Sch. 29 para. 18(1)(a) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 38(2)(a)

F24 Words in Sch. 29 para. 18(1)(c) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 38(2)(b)

F25 Words in Sch. 29 para. 18(1)(d) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 38(2)(c)

F26 Sch. 29 para. 18(1A)(1B) inserted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 38(3)

F27 Sch. 29 para. 18(2)(b) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 38(4)(a)

F28 Words in Sch. 29 para. 18(2)(d) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 38(4)(b)

F29 Words in Sch. 29 para. 18(2)(e) substituted (19.7.2007 (with effect in accordance with Sch. 19 para. 29(6) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 16(5)

F30 Words in Sch. 29 para. 18(2)(e) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 38(4)(c)

F31 Words in Sch. 29 para. 18(4) substituted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 38(5)

Transfer lump sum death benefit U.K.

F32 19 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F32 Sch. 29 para. 19 repealed (19.7.2007) (with effect in accordance with Sch. 19 para. 29(3) of the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 9, Sch. 27 Pt. 3(1)

Defined benefits and money purchase arrangements U.K.

Trivial commutation lump sum death benefit U.K.

20 (1) A lump sum death benefit is a trivial commutation lump sum death benefit if— U.K.

F33 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) it is paid to a dependant entitled under the pension scheme to pension death benefit in respect of the member,

F34 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and

(d) it extinguishes the dependant’s entitlement under the pension scheme to pension death benefit and lump sum death benefit in respect of the member.

(2) But if the amount of a lump sum falling within sub-paragraph (1) exceeds [F35 £18,000,] the excess is not a trivial commutation lump sum death benefit.

[F36 (3) The Treasury may by order substitute for the amount for the time being specified in sub-paragraph (2) such larger amount as is specified in the order.]

Textual Amendments

F33 Sch. 29 para. 20(1)(a) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 39(a)

F34 Sch. 29 para. 20(1)(c) omitted (with effect in accordance with Sch. 16 paras. 85, 103 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 39(b)

F35 Word in Sch. 29 para. 20(2) substituted (with effect in accordance with Sch. 18 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 18 para. 6(2)

F36 Sch. 29 para. 20(3) inserted (with effect in accordance with Sch. 18 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 18 para. 6(3)

Winding-up lump sum death benefit U.K.

21 (1) For the purposes of this Part a lump sum death benefit is a winding-up lump sum death benefit if— U.K.

(a) the pension scheme is being wound-up,

(b) it is paid to a dependant entitled under the pension scheme to pension death benefit in respect of the member, and

(c) it extinguishes the dependant’s entitlement under the pension scheme to pension death benefit and lump sum death benefit in respect of the member.

(2) But if the amount of a lump sum falling within sub-paragraph (1) exceeds [F37 £18,000,] the excess is not a winding-up lump sum death benefit.

[F38 (3) The Treasury may by order substitute for the amount for the time being specified in sub-paragraph (2) such larger amount as is specified in the order.]

Textual Amendments

F37 Word in Sch. 29 para. 21(2) substituted (with effect in accordance with Sch. 18 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 18 para. 7(2)

F38 Sch. 29 para. 21(3) inserted (with effect in accordance with Sch. 18 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 18 para. 7(3)

Interpretation U.K.

Interpretation of Part 2 U.K.

22 (1) Expressions used in this Part of this Schedule and in Schedule 28 have the same meaning in this Part of this Schedule as in Schedule 28. U.K.

(2) Where by virtue of paragraph 14(2), 20(2) or 21(2) an excess is not an authorised lump sum death benefit of one description, that does not prevent the excess being an authorised lump sum death benefit of another description.

(3) “Authorised lump sum death benefit” means a lump sum death benefit authorised to be paid by the lump sum death benefit rule.