SCHEDULE 32F1Registered pension schemes: benefit crystallisation events ...
F3Introduction
A1
(1)
This Schedule applies for the purposes of sections 232 and 236.
(2)
In this Schedule—
(a)
paragraph A2 sets out the events that are benefit crystallisation events in relation to an individual;
(b)
subsequent paragraphs give the meaning of expressions used in paragraph A2.
The benefit crystallisation events
A2
(1)
Benefit crystallisation event 1 occurs in relation to an individual if sums or assets held for the purposes of a money purchase arrangement under any of the relevant pension schemes are designated as available for the payment of drawdown pension to the individual.
(2)
Benefit crystallisation event 2 occurs in relation to an individual if the individual becomes entitled to a scheme pension under any of the relevant pension schemes.
(3)
Benefit crystallisation event 3 occurs in relation to an individual if the individual, having become so entitled, becomes entitled to payment of the scheme pension, otherwise than in excepted circumstances, at an increased annual rate which—
(a)
exceeds the threshold annual rate, and
(b)
exceeds by more than the permitted margin the rate at which it was payable on the day on which the individual became entitled to it.
(4)
Benefit crystallisation event 4 occurs in relation to an individual if the individual becomes entitled to a lifetime annuity purchased under a money purchase arrangement under any of the relevant pension schemes.
(5)
Benefit crystallisation event 6 occurs in relation to an individual if the individual becomes entitled to a relevant lump sum under any of the relevant pension schemes.
General: meaning of “the relevant pension schemes”
1
F6...
F62
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F7...
F72A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F8...
F82B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F83
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F9...
F94
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F10...
F105
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F11...
F116
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit crystallisation events 2 and 4: early lifetime annuities
7
(1)
This paragraph has effect if—
(a)
the individual becomes entitled before reaching normal minimum pension age to the payment of a lifetime annuity purchased under a money purchase arrangement under any of the relevant pension schemes, and
(b)
the ill-health condition is not satisfied immediately before the individual becomes so entitled.
(2)
Benefit crystallisation event 2 applies as if—
(a)
the lifetime annuity were a scheme pension under the pension scheme, and
(b)
the individual becomes entitled to it only on reaching normal minimum pension age.
(3)
Benefit crystallisation event 4 does not apply in relation to the lifetime annuity.
F12(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F13(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit crystallisation event 2: early pensions
8
For the purposes of benefit crystallisation event 2 if—
(a)
the individual becomes entitled to the pension before reaching normal minimum pension age, and
(b)
the ill-health condition is not satisfied immediately before the individual becomes entitled to the pension,
the individual is to be treated as becoming entitled to it only on reaching normal minimum pension age.
F14...
F149
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F15Benefit crystallisation event 3: disregarding abatement
9A
For the purposes of benefit crystallisation event 3, any abatement of the scheme pension is to be left out of account in determining for the purposes of column 1—
(a)
the increased annual rate of the pension, and
(b)
the rate at which it was payable on the day on which the individual became entitled to it.
Benefit crystallisation event 3: excepted circumstances
10
F16A1
For the purposes of benefit crystallisation event 3 “excepted circumstances” exist if condition A or B is met.
F17(1)
F18Condition A is that—
F19(za)
the entitlement to payment of a scheme pension at an increased annual rate is under an arrangement that is not a collective money purchase arrangement,
(a)
F20... at the time when the annual rate of the individual’s pension is increased there are at least 50 pensioner members of the pension scheme, and
F23(2)
A class may consist of all the pensioner members of the pension scheme.
(3)
Sub-paragraph (4) applies where—
(a)
the annual rate of the individual's pension is increased in excepted circumstances (“the excepted increase”),
(b)
before the end of the period of 12 months beginning with the date of the excepted increase, the annual rate of the individual's pension is increased in circumstances which would (apart from that sub-paragraph) be excepted circumstances (“the subsequent increase”), and
(c)
the class by virtue of which sub-paragraph (1)(b) is satisfied on the subsequent increase (“the new class”) is not the class by virtue of which it was satisfied on the excepted increase.
(4)
If the purpose, or one of the main purposes, of the individual's being included in the new class is to increase the annual rate of the individual's pension without benefit crystallisation event 3 occurring, the subsequent increase is not in excepted circumstances.
F24(5)
Condition B is that—
(a)
the entitlement to payment of a scheme pension at an increased annual rate is under an arrangement that is a collective money purchase arrangement, and
(b)
at the time when the annual rate of the individual's pension is increased, all the scheme pensions being paid under collective money purchase arrangements are increased at the same rate.
F25Benefit crystallisation event 3: threshold annual rate
10A
(1)
This paragraph applies for the purposes of benefit crystallisation event 3.
(2)
The threshold annual rate is the annual rate of the pension on the date of which the increase date is the first anniversary, increased by the greatest of—
(a)
the relevant percentage rate,
(b)
the relevant indexation percentage, and
(c)
£250,
and rounded up in accordance with sub-paragraph (8).
(3)
But if the person became entitled to the pension after the date of which the increase date is the first anniversary, the threshold annual rate is the annual rate of the pension on the date on which the person became entitled to the pension, increased and rounded up as mentioned in sub-paragraph (2).
(4)
The increase date is the date on which the individual becomes entitled to payment of the pension at the increased annual rate.
(5)
The relevant percentage rate is—
(a)
in a case where the pension is paid under a pension scheme, or an arrangement under a pension scheme, in relation to which the relevant valuation factor is a number greater than 20, the rate agreed by the Commissioners for Her Majesty's Revenue and Customs and the scheme administrator, and
(b)
otherwise, 5%.
(6)
The relevant indexation percentage means—
(a)
if the retail prices index for the reference month is higher than the retail prices index for the same calendar month in the previous year, the percentage increase in the retail prices index, and
(b)
if it is not, 0%.
(7)
The scheme administrator may select as the reference month any month in the period of 12 months ending with the month in which the increase date falls.
(8)
An amount is rounded up in accordance with this sub-paragraph if it is rounded up to the next greatest amount which—
(a)
where the pension is payable monthly, gives an amount of whole pounds when divided by 12, or
(b)
where the pension is payable weekly, gives an amount of whole pounds when divided by 52.
(9)
If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining for the purposes of this paragraph the annual rate of the pension on the date of which the increase date is the first anniversary (or, where sub-paragraph (3) applies, the date on which the person became entitled to the pension).
(10)
An individual who becomes entitled to payment of a scheme pension at an increased annual rate on 29 February in any year is to be treated for the purposes of this paragraph as having become so entitled on 28 February in that year.
(11)
The Treasury may by order substitute for the amount for the time being specified in sub-paragraph (2)(c) a different amount (including an amount to be calculated as a percentage of the standard lifetime allowance).
Benefit crystallisation event 3: permitted margin
11
(1)
This paragraph applies for the purposes of benefit crystallisation event 3 if the individual became entitled to the pension on or after 6th April 2006.
(2)
The permitted margin is the amount by which the annual amount of the pension at the rate at which it was payable on the day on which the individual became entitled to it would be greater if it had been increased by whichever of calculation A and calculation B gives the greater amount.
(3)
Calculation A involves increasing that annual amount at the relevant annual percentage rate for the whole of the period—
(a)
beginning with the month in which the individual became entitled to the pension, and
(b)
ending with the month in which the individual becomes entitled to payment of the pension at the increased rate.
(4)
The relevant annual percentage rate is—
(a)
in a case where the pension is paid under a pension scheme, or an arrangement under a pension scheme, in relation to which the relevant valuation factor is a number greater than 20, the annual rate agreed by the Inland Revenue and the scheme administrator, and
(b)
otherwise, 5% per annum.
(5)
Calculation B involves increasing that annual amount by the relevant indexation percentage.
(6)
(7)
If it is not, the relevant indexation percentage is 0%.
F28(7A)
The scheme administrator may select as the reference month any month in the period of 12 months ending with the month in which the individual becomes entitled to payment of the pension at the increased rate.
(7B)
The base month is the month which is the same number of months before the month in which the individual became entitled to the pension, as the reference month is before the month in which the individual becomes entitled to payment of the pension at the increased rate.
F29(8)
If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining for the purposes of this paragraph the annual amount of the pension at the rate at which it was payable on the day on which the individual became entitled to it.
Benefit crystallisation event 3: permitted margin
12
(1)
This paragraph applies for the purposes of benefit crystallisation event 3 if the individual became entitled to the pension before 6th April 2006.
(2)
The permitted margin is the greater of—
(a)
what would be the permitted margin at that time if the individual had become entitled to the pension on or after that date (see paragraph 11), and
(b)
the amount by which the annual amount of the pension at the rate at which it was payable on the day on which the individual became entitled to it would be greater if it had been increased for the whole of the period specified in sub-paragraph (3) of that paragraph at the rate of P% per annum.
(3)
“P%” is the percentage by which, in accordance with the rules of the pension scheme immediately before 6th April 2006, the annual rate of the pension is to be increased each year.
F30(4)
If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining for the purposes of this paragraph the annual amount of the pension at the rate at which it was payable on the day on which the individual became entitled to it.
F31...
F3113
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F32...
F3214
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F33...
F3314ZA
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F34...
F3414ZB
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F35...
F3514A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F36...
F3614B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F37...
F3714C
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit crystallisation event 6: meaning of “relevant lump sum”
15
For the purposes of benefit crystallisation event 6 a lump sum is a relevant lump sum if it is—
(a)
a pension commencement lump sum,
(b)
a serious ill-health lump sum,
F38(ba)
an uncrystallised funds pension lump sum, or
(c)
a F39pension commencement excess lump sum.
F40...
F4015A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F41...
F4116
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F42...
F4217
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .