Finance Act 2004 (c. 12)

Part 4 U.K. Pension schemes etc

Modifications etc. (not altering text)

C1 Pt. 4 modified (N.I.) (1.4.2006) by The Firemens Pension Scheme Order (Northern Ireland) 2006 (S.R. 2006/210), arts. 1(2), 103

C2 Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 9, 10

C3 Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 12

C4 Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 13(5)

C5 Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 26

C6 Pt. 4 modified (31.12.2007) by Police and Justice Act 2006 (c. 48), s. 53(1), Sch. 3 para. 7; S.I. 2007/3203, art. 3(b)

C7 Pt. 4 modified (1.7.2008) (N.I.) (with effect in accordance with reg. 1 of the amending Rule) by The Health and Social Care (Pension Scheme) Regulations (Northern Ireland) 2008 (S.R. 2008/256), regs. 1, 124(1) (with regs. 134, 258)

C8 Pt. 4 modified by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), reg. 5A (as inserted (6.4.2006) by S.I. 2008/2990, arts. 1(1), 3)

C9 Pt. 4 applied (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 18

C10 Pt. 4 modified (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(3)

C11 Pt. 4 applied (with modifications) (with application in accordance with Sch. 22 para. 1 of the amending Act) by Finance Act 2013 (c. 29), Sch. 22 para. 1(2)

C12 Pt. 4 modified (17.7.2014) by Finance Act 2014 (c. 26), Sch. 6 para. 1(2)(3)

Chapter 3 U.K. Payments by registered pension schemes

Authorised member payments U.K.

165 Pension rules U.K.

(1) These are the rules relating to the payment of pensions by a registered pension scheme to a member of the pension scheme (“the pension rules”).

• Pension rule 1

  No payment of pension may be made before the day on which the member reaches normal minimum pension age, unless the ill-health condition was met immediately before the member became entitled to a pension under the pension scheme.

• Pension rule 2

  If the member dies before the end of the period of ten years beginning with the day on which the member became entitled to a scheme pension [F1 or an annuity], payment of the scheme pension [F2 or annuity] may continue to be made (to any person) until the end of that period.

  But no other payment of the member’s pension may be made after the member’s death.

• Pension rule 3

  No payment of pension other than a scheme pension may be made in respect of a defined benefits arrangement.

• Pension rule 4

  [F3 No payment of pension] other than—

  (a)

  a scheme pension,

  (b)

  a lifetime annuity, or

  (c)

  [F4 drawdown pension]

  may be made in respect of a money purchase arrangement; but a scheme pension may only be paid if the member had an opportunity to select a lifetime annuity instead.

• [F5 Pension rule 5

  The total amount of drawdown pension paid in each drawdown pension year in respect of a money purchase arrangement must not exceed [F6 150%] of the basis amount for the drawdown pension year.]

• F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• F7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) In this Part “pension”, in relation to a registered pension scheme, includes—

(a) an annuity, and

(b) income withdrawal.

(3) For the purposes of this Part, a person becomes entitled to a pension under a registered pension scheme—

(a) in the case of income withdrawal under the pension scheme, whenever sums or assets held for the purposes of an arrangement under the pension scheme are designated as available for the payment of [F8 drawdown pension], and

(b) in any other case, when the person first acquires an actual (rather than a prospective) right to receive the pension

[F9 and, for this purpose, the abatement of a scheme pension under a public service pension scheme is not to be taken to affect the right to receive it].

[F10 (3A) This subsection applies to an arrangement if—

(a) the member meets the flexible drawdown conditions,

(b) the member makes a valid declaration to the scheme administrator to that effect, and

(c) the declaration is accepted by the scheme administrator.

(3B) The member meets the flexible drawdown conditions if—

(a) the member satisfied the minimum income requirement on the relevant day,

(b) no relevant contributions are paid under any money purchase arrangement (other than a cash balance arrangement) relating to the member under a registered pension scheme in the tax year in which the declaration is made, and

(c) at the time of the declaration the member is not an active member of any registered pension scheme under which there is a defined benefits or cash balance arrangement relating to the member.]

(4) Part 1 of Schedule 28 gives the meaning of expressions used in the pension rules.

Textual Amendments

F1 Words in s. 165(1) substituted (with effect as specified in Sch. 19 para. 29(1) to the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 2(2)(a)

F2 Words in s. 165(1) substituted (with effect as specified in Sch. 19 para. 29(1) to the amending Act) by Finance Act 2007 (c. 11), Sch. 19 para. 2(2)(b)

F3 Words in s. 165(1) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 1(2)(a)(i)

F4 Words in s. 165(1) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 1(2)(a)(ii)

F5 Words in s. 165(1) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 1(2)(b)

F6 Word in s. 165(1) substituted (with effect in accordance with s. 41(6) of the amending Act) by Finance Act 2014 (c. 26), s. 41(1)

F7 Words in s. 165(1) omitted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 1(2)(c); and omitted (6.4.2015) by virtue of Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 32(1)(a)(4)

F8 Words in s. 165(3)(a) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 64

F9 Words in s. 165(3) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 7, 64(1)

F10 S. 165(3A)(3B) inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 1(3)

Modifications etc. (not altering text)

C13 S. 165 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), 6

C14 S. 165 modified (27.7.2010) by Finance (No. 2) Act 2010 (c. 31), Sch. 3 para. 2(1)(2)(a) (with Sch. 2 para. 2(1))

C15 S. 165 modified (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 90(2)(a)

C16 S. 165 modified (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 91(2)(a)

C17 S. 165 modified by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (S.I. 2006/207), reg. 6 (as substituted (with effect in accordance with reg. 1(2) of the amending S.I.) by S.I. 2012/1795, regs. 1(1), 3)

C18 S. 165(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 3, 4(1)(2)

Commencement Information

I1 Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284