The Registered Pension Schemes (Enhanced Lifetime Allowance) (Amendment) Regulations 2006

EXPLANATORY NOTE

(This note is not part of the Regulations)

These Regulations, which amend the Registered Pension Schemes (Enhanced Lifetime Allowance) Regulations 2006 (S.I. 2006/131) (“the principal Regulations”), have been made as a result of the inclusion of certain provisions in the Finance Act 2006 (c. 25). Paragraph 38 of Schedule 23 to the Finance Act 2006 inserts a new paragraph 11A into Schedule 36 to the Finance Act 2004 (c. 12), and paragraph 41 of Schedule 23 to the Finance Act 2006 inserts a new paragraph 15A into Schedule 36 to the Finance Act 2004.

Schedule 36 of the 2004 Act falls within Part 4 of that Act, which deals with pension schemes. The pension schemes legislation in that Act includes provision that an individual has a lifetime allowance on the amount of pension savings that may benefit from tax relief; and the lifetime allowance is usually the standard lifetime allowance. However, the legislation also contains provisions relating to an enhanced lifetime allowance and to enhanced protection: but these provisions only apply if notice of intention to rely on the provision in question is given in accordance with regulations.

The principal Regulations contain provisions which enable an individual to rely on the enactments providing for an enhanced lifetime allowance and enhanced protection. Those Regulations also contain provisions of an administrative nature.

Following the enactment of the Finance Act 2006, there are now two further provisions (“the new provisions”) which provide for an enhanced lifetime allowance or for enhanced protection: but once again only if notice of intention to rely on the provision is given in accordance with regulations. Paragraph 11A of Schedule 36 extends the entitlement to an enhanced lifetime allowance in certain circumstances where the entitlement to lump sum benefits in relation to an individual, were the individual to have died on 5th April 2006, is greater than the pre-commencement pension rights previously calculated under paragraph 7 of Schedule 36; and paragraph 15A of Schedule 36 extends the enhanced protection rules in certain circumstances where the entitlement to lump sum benefits in relation to an individual, were the individual to have died on 5th April 2006, is greater than the pre-commencement pension rights previously calculated under paragraph 15(4) of Schedule 36.

These Regulations accordingly amend the principal Regulations to take account of the new provisions. Regulations 4 and 5 of these Regulations insert regulations 3A and 4A into the principal Regulations to enable reliance to be placed, respectively, on paragraphs 11A and 15A of Schedule 36 to the Finance Act 2004. The procedure to be followed in the case of the new provisions differs from that applying in other cases. Regulations 6 to 9 of these Regulations accordingly make further amendments to the principal Regulations to ensure that separate provision is made for the form of notification to be given, the procedure on the giving of a notification and for an appeal hearing if there is a dispute about the validity of the notification.

A regulatory impact assessment in respect of the provisions of Part 4 of the Finance Act 2004, as amended by the Finance Act 2005 and the Finance Act 2006 is available on the website of HM Revenue and Customs at www.hmrc.gov.uk/ria/simplifying-pensions.pdf and may be obtained by writing to the Ministerial Correspondence Unit, 1st Floor, HM Revenue and Customs, Ferrers House, PO Box 38, Castle Meadow Road, Nottingham, NG2 1BB.