Finance Act 2004

Part 2 U.K. Pension death benefit rules

Modifications etc. (not altering text)

C1 Sch. 28 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), 14

Defined benefits and money purchase arrangements U.K.

Meaning of “dependant” U.K.

15 (1) A person who was married to [F1 , or a civil partner of,] the member at the date of the member’s death is a dependant of the member. U.K.

[F2 (1A) If the rules of the pension scheme so provide, a person who was married to [F3 , or a civil partner of,] the member when the member first became entitled to a pension under the pension scheme is a dependant of the member.]

(2) A child of the member is a dependant of the member if the child—

(a) has not reached the age of 23, or

(b) has reached that age and, in the opinion of the scheme administrator, was at the date of the member’s death dependant on the member because of physical or mental impairment.

(3) A person who was not married to [F4 , or a civil partner of,] the member at the date of the member’s death and is not a child of the member is a dependant of the member if, in the opinion of the scheme administrator, at the date of the member’s death—

(a) the person was financially dependant on the member,

(b) the person’s financial relationship with the member was one of mutual dependence, or

(c) the person was dependant on the member because of physical or mental impairment.

Textual Amendments

F1 Words in Sch. 28 para. 15(1) inserted (with effect in accordance with reg. 1(7) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 180(a)

F2 Sch. 28 para. 15(1A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 26, 64(1)

F3 Words in Sch. 28 para. 15(1A) inserted (with effect in accordance with reg. 1(7) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 180(b)

F4 Words in Sch. 28 para. 15(3) inserted (with effect in accordance with reg. 1(7) of the amending S.I.) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 180(c)

Modifications etc. (not altering text)

C2 Sch. 28 para. 15(2) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 34

C3 Sch. 28 para. 15(2)(b) modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

C4 Sch. 28 para. 15(3) modified (6.4.2006) by The Registered Pension Schemes (Splitting of Schemes) Regulations 2006 (S.I. 2006/569), regs. 1(1), 3(1)(2), Sch. 3 Pt. 1

Dependants' scheme pension U.K.

16 F5 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

(2) [F6 A] pension payable to a dependant is a dependants' scheme pension [F7 for the purposes of this Part] if—

(a) it is payable by the scheme administrator or by an insurance company selected by the scheme administrator, F8 ...

F8 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F9 (2A) The Board of Inland Revenue may by regulations make provision in relation to cases in which a dependants' scheme pension payable to a dependant of a member of a registered pension scheme by an insurance company (“the original dependants' scheme pension”) 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' scheme pension (a “new dependants' scheme pension”) or a scheme pension, lifetime annuity, short-term annuity, dependants' annuity or dependants' short-term annuity by the other insurance company, or

(b) sums or assets are transferred to the relevant registered pension scheme.

(2B) The regulations may provide that—

(a) in a case where a new dependants' scheme pension becomes payable, the new dependants' scheme pension 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' scheme pension, and

(b) in any other case, 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.

(2C) For the purposes of sub-paragraphs (2A) and (2B) a registered pension scheme is the relevant registered pension scheme if the original dependants' scheme pension was acquired using sums or assets held for the purposes of the pension scheme.]

F10 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F5 Sch. 28 para. 16(1) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 27(2), 64(1), Sch. 11 Pt. 4

F6 Word in Sch. 28 para. 16(2) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 27(3)(a), 64(1)

F7 Words in Sch. 28 para. 16(2) inserted (21.7.2008) by Finance Act 2008 (c. 9), Sch. 28 para. 5

F8 Sch. 28 para. 16(2)(b) and word repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 27(3)(b), 64(1), Sch. 11 Pt. 4

F9 Sch. 28 para. 16(2A)-(2C) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 27(4), 64(1)

F10 Sch. 28 para. 16(3)-(6) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 27(5), 64(1), Sch. 11 Pt. 4

[F11 16A (1) Paragraphs 16B and 16C apply where— U.K.

(a) the member dies after 5th April 2006,

(b) he has reached the age of 75 before his death, and

(c) at the time of his death he is actually or prospectively entitled to one or more scheme pensions under the pension scheme.

(2) References in this paragraph and paragraph 16B to a scheme pension include a pension payable before 6th April 2006 which would be a scheme pension if payable after that date.

Textual Amendments

F11 Sch. 28 paras. 16A-16C inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 28, 64(1)

Modifications etc. (not altering text)

C5 Sch. 28 para. 16A modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 24

16B (1) Where a pension is payable under the pension scheme to a dependant of the member in the period of 12 months beginning with the date of the member's death (“the post-death year”), so much of the pension as exceeds the initial member pension limit is not a dependants' scheme pension. U.K.

(2) But if—

(a) more than one pension is so payable to one of the dependants of the member in the post-death year, or

(b) pensions are so payable to more than one dependant of the member in the post-death year,

(or both), so much of any of the pensions as exceeds the appropriate portion of the initial member pension limit is not a dependants' scheme pension.

(3) The “initial member pension limit” is (subject to sub-paragraph (4)) the sum of—

(a) the aggregate of the amounts of the scheme pensions to which the member is actually entitled under the pension scheme immediately before his death payable to the member in the period of 12 months ending with the date of his death (“the pre-death year”),

(b) the aggregate of the amounts of the scheme pensions to which the member is prospectively entitled under the pension scheme at that time which would have been so payable if he had been actually entitled to the pensions throughout the pre-death year, and

(c) 5% of the aggregate of the amounts of the lump sums on which there is no liability to income tax to which the member has become entitled in connection with scheme pensions under the pension scheme before his death.

(4) But if the member became (actually) entitled to a scheme pension under the pension scheme during the pre-death year, sub-paragraph (3)(a) has effect as if the amount of that scheme pension which was payable to the member under the pension scheme in the pre-death year were the amount which would have been payable to him in the period of 12 months beginning with the date on which he became entitled to it had he not died.

(5) The “appropriate portion” of the initial member pension limit, in relation to any pension payable under the pension scheme to a dependant of the member in the post-death year, is—

where—

P is the amount of that pension payable in the post-death year, and

AP is the aggregate of the amounts of each of the pensions payable under the pension scheme to dependants of the member in the post-death year.

Textual Amendments

F11 Sch. 28 paras. 16A-16C inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 28, 64(1)

16C (1) Where a pension is payable under the pension scheme to a dependant of the member, otherwise than in excepted circumstances, in— U.K.

(a) the period of 12 months beginning with the end of the post-death year, or

(b) any succeeding period of 12 months,

(“the 12 months in question”), so much of the pension as exceeds the current member pension limit is not a dependants' scheme pension.

(2) But if—

(a) more than one pension is so payable to one of the dependants in the 12 months in question, or

(b) pensions are so payable to more than one dependant of the member in the 12 months in question,

(or both), so much of any of the pensions as exceeds the appropriate portion of the current member pension limit is not a dependants' scheme pension.

(3) “Excepted circumstances” means—

(a) that at the beginning of the period of 12 months in question there are at least 50 pensioner members of the pension scheme, and

(b) that the condition in subsection (4) is met.

(4) The condition in this subsection is met if —

(a) the difference between CYP and PYP in the case of each relevant existing pension is the same amount,

(b) the difference between CYP and PYP in the case of each relevant existing pension is the same percentage of PYP, or

(c) in the case of each relevant existing pension the difference between CYP and PYP is the aggregate of a percentage of PYP and an amount which are both the same as those the aggregate of which make up the difference between CYP and PYP in the case of each other relevant existing pension.

(5) In this section—

• “relevant existing pension” means a pension payable to any dependant of any member under the pension scheme throughout the 12 months in question and the immediately preceding period of 12 months,

• “CYP”, in relation to a relevant existing pension, is the current year pension, that is the amount of the pension payable in the 12 months in question, and

• “PYP”, in relation to a relevant existing pension, is the previous year pension, that is the amount of the pension payable in the immediately preceding period of 12 months.

(6) The “current member pension limit”, in relation to the 12 month period in question, is the initial member pension limit increased by the aggregate of—

(a) the permitted margin, and

(b) the excepted circumstances amount.

(7) The “permitted margin” is the amount by which the initial member pension limit would be greater if it had been increased by whichever of calculation A and calculation B gives the greater amount.

(8) Calculation A involves increasing the initial member pension limit by the relevant annual percentage rate for the whole of the period—

(a) beginning with the first month beginning after the end of the post-death year (“the opening month”), and

(b) ending with the first month of the 12 months in question (“the closing month”).

(9) The relevant annual percentage rate is—

(a) if the relevant valuation factor in relation to the pension scheme is a number greater than 20, the annual rate agreed by the Inland Revenue and the scheme administrator, and

(b) otherwise, 5% per annum.

(10) Calculation B involves increasing the initial member pension limit by the relevant indexation percentage.

(11) If the retail prices index for the closing month is higher than it was for the opening month, the relevant indexation percentage is the percentage increase in the retail prices index.

(12) If it is not, the relevant indexation percentage is 0%.

(13) The “excepted circumstances amount” is the aggregate of the amounts of the relevant increases in pensions which were payable under the pension scheme to dependants of the member in excepted circumstances in any period or periods within subsection (1)(a) or (b).

(14) The relevant increase in the case of any pension payable in relation to any 12 month period under the pension scheme to a dependant of the member is the difference between CYP and PYP (for this purpose reading the references in subsection (5) to the 12 months in question as references to the 12 month period).

(15) The “appropriate portion” of the current member pension limit, in relation to any pension payable under the pension scheme to a dependant of the member in the 12 months in question, is—

where—

P is the amount of that pension payable in the 12 months in question, and

AP is the aggregate of the amounts of each of the pensions payable under the pension scheme to one or more dependants of the member in the 12 months in question.]

Textual Amendments

F11 Sch. 28 paras. 16A-16C inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 28, 64(1)

Money purchase arrangements U.K.

Dependants' annuity U.K.

17 (1) [F12 For the purposes of this Part an] annuity payable to a dependant is a dependants' annuity if— U.K.

[F13 (za) it is purchased either together with a lifetime annuity payable to the member or after the member's death,]

(a) it is payable by an insurance company,

(b) the member or dependant had an opportunity to select the insurance company,

[F14 (c) 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 marrying[F15 , 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 marrying[F16 , entering into a civil partnership], ceasing to be a dependant or dying.

[F17 (1A) For the purposes of sub-paragraph (1)(za) a dependants' annuity is purchased together with a lifetime annuity if the dependant's annuity is related to the lifetime annuity.]

[F18 (2) An annuity does not fail to satisfy sub-paragraph (1)(c) by reason of the operation of a pension sharing order or provision.

(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—

(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 any other case, 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.

F19 (4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(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.]

Textual Amendments

F12 Words in Sch. 28 para. 17(1) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 15(2), 64(1)

F13 Sch. 28 para. 17(1)(za) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 29(2), 64(1)

F14 Sch. 28 para. 17(1)(c) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 15(3), 64(1)

F15 Words in Sch. 28 para. 17(1)(d) inserted (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 2(3)

F16 Words in Sch. 28 para. 17(1)(e) inserted (22.2.2007) by The Tax and Civil Partnership Regulations 2007 (S.I. 2007/493), regs. 1, 2(3)

F17 Sch. 28 para. 17(1A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 29(3), 64(1)

F18 Sch. 28 para. 17(2)-(5) substituted for Sch. 28 para. 17(2) (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 15(4), 64(1)

F19 Sch. 28 para. 17(4A) omitted (21.7.2009) by virtue of Finance Act 2009 (c. 10), s. 75(2)(d)

[F20 Dependants' drawdown pension] U.K.

Textual Amendments

F20 Sch. 28 para. 18 cross-heading substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 13(2)

18 U.K. [F21 “Dependants' drawdown pension”] means—

(a) a dependants' short-term annuity, or

(b) dependants' income withdrawal.

Textual Amendments

F21 Words in Sch. 28 para. 18 substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 13(1)

F22 19 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F22 Sch. 28 para. 19 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. 78(c)

Dependants' short-term annuity U.K.

20 (1) [F23 For the purposes of this Part an] annuity payable to a dependant is a dependants' short-term annuity if— U.K.

(a) it is purchased by the application of sums or assets representing the whole or any part of the [F24 dependant'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,

(d) it is payable for a term which does not exceed five years and ends before the dependant F25 ... dies, and

[F26 (e) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.]

[F27 (1A) 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—

(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 any other case, 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.]

F28 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F23 Words in Sch. 28 para. 20(1) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(2), 64(1)

F24 Words in Sch. 28 para. 20(1)(a) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 14(a)

F25 Words in Sch. 28 para. 20(1)(d) 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. 14(b)

F26 Sch. 28 para. 20(1)(e) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(3), 64(1)

F27 Sch. 28 para. 20(1A)-(1D) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(4), 64(1)

F28 Sch. 28 para. 20(2) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(5), 64(1), Sch. 11 Pt. 4

Modifications etc. (not altering text)

C6 Sch. 28 para. 20 modified (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 95

Dependants' income withdrawal U.K.

[F29 21 U.K. 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.]

Textual Amendments

F29 Sch. 28 para. 21 substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 15

[F30 Dependant's drawdown pension fund] U.K.

Textual Amendments

F30 Sch. 28 para. 22 cross-heading substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 16(5)

22 (1) For the purposes of this Part a [F31 dependant's drawdown pension fund] in respect of an arrangement consists of such of the sums and assets held for the purposes of the arrangement— U.K.

[F32 (a) as are dependant-designated funds, and

(b) have not been applied towards the provision of a dependants' scheme pension.]

[F33 (2) For the purposes of this Part sums or assets held for the purposes of an arrangement are dependant-designated funds if they—

(a) have been designated at any time under the arrangement as available for the payment of [F34 dependants' drawdown pension] to the dependant, or

(b) arise, or (directly or indirectly) derive, from sums or assets which have been so designated or which so arise or derive.

(3) If any sums or assets representing a [F35 dependant's drawdown pension fund] in respect of an arrangement under the pension scheme would (apart from this sub-paragraph)—

(a) come to be taken to represent another [F35 dependant's drawdown pension fund] of his under the pension scheme, or [F36 a drawdown pension fund] of his under the pension scheme, or

(b) are applied towards the provision of a scheme pension or a lifetime annuity,

they are to be treated as not doing so.]

Textual Amendments

F31 Words in Sch. 28 para. 22(1) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 16(2)

F32 Sch. 28 para. 22(1)(a)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 21(2), 64(1)

F33 Sch. 28 para. 22(2)(3) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 21(3), 64(1)

F34 Words in Sch. 28 para. 22(2)(a) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 16(3)

F35 Words in Sch. 28 para. 22(3) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 16(4)(a)

F36 Words in Sch. 28 para. 22(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. 16(4)(b)

Modifications etc. (not altering text)

C7 Sch. 28 para. 22 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 30(1)-(3)

C8 Sch. 28 para. 22(2) modified (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 96

[F37 Drawdown pension year and basis amount for drawdown pension year] U.K.

Textual Amendments

F37 Sch. 28 para. 23 cross-heading substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 17(4)

23 (1) [F38 “Drawdown pension year”] means— U.K.

(a) the period of 12 months beginning with the day on which the dependant first becomes entitled to [F39 dependants' drawdown pension] in respect of the arrangement, and

(b) each succeeding period of 12 months.

[F40 This is subject to paragraph 24B.]

[F41 (2) The drawdown pension year in which the dependant dies is the last drawdown pension year and ends immediately before the dependant's death.]

Textual Amendments

F38 Words in Sch. 28 para. 23(1) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 17(2)(a)

F39 Words in Sch. 28 para. 23(1)(a) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 17(2)(b)

F40 Words in Sch. 28 para. 23(1) inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 17(2)(c)

F41 Sch. 28 para. 23(2) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 17(3)

Modifications etc. (not altering text)

C9 Sch. 28 para. 23(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 30(1)(2)(4)

C10 Sch. 28 para. 23(1)(a) modified (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 100(2)

C11 Sch. 28 para. 23(1)(a) modified (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 97(2)

C12 Sch. 28 para. 23(2) modified (27.7.2010) by Finance (No. 2) Act 2010 (c. 31), Sch. 3 para. 2(1)(2)(d)(ii) (with Sch. 2 para. 2(1))

24 [F42 (A1) This paragraph applies in relation to drawdown pension years beginning on or before the dependant's 75th birthday. U.K.

(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.]

[F43 (1A) 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

(b) that (subject to [F44 sub-paragraph (1ZA) and] any further operation of this sub-paragraph) the period of [F45 three drawdown pension years] beginning with that day, and each succeeding period of [F45 three drawdown pension years], is to be a reference period.

(1C) The first day of each reference period is, in relation to that period, “the reference date”.]

(2) For the first [F46 drawdown 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 [F47 dependant'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).

(4) For each other [F48 drawdown 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 [F49 dependant's drawdown pension fund]—

(a) if there has been no recent annuity purchase[F50 , recent additional fund designation or recent pension sharing event], on the nominated date, and

(b) otherwise, immediately after the last annuity purchase[F51 , additional fund designation or pension sharing event],

(but subject to sub-paragraph (5)).

(5) On the occasion of each additional fund designation during [F52 a drawdown pension year], the basis amount for [F53 that drawdown pension year] is to be recalculated in accordance with sub-paragraph (6).

(6) The basis amount for the [F54 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 [F55 dependant's drawdown pension fund] immediately after the additional fund designation.

[F56 (6A) 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.]

(7) “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 [F57 dependant's drawdown pension fund].

(8) “Additional fund designation” means the designation under the arrangement of further [F58 sums or assets] held for the purposes of the arrangement as available for the payment of [F59 dependants' drawdown pension] to the dependant.

[F60 (8A) “Pension sharing event” means the coming into operation of a pension sharing order or provision relating to the sums and assets representing the [F61 dependant's drawdown pension fund].]

(9) An annuity purchase[F62 , 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 [F63 drawdown pension year].

(10) Paragraph 14 defines “relevant annuity”.

[F64 (11) Nothing in this paragraph applies in respect of an arrangement to which section 167(2A) applies.]

Textual Amendments

F42 Sch. 28 para. 24(1)(1ZA)(A1) substituted for Sch. 28 para. 24(1) (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(2)

F43 Sch. 28 para. 24(1)-(1C) substituted (19.7.2007) for Sch. 28 para. 24(1) (with effect in accordance with Sch. 20 para. 24(5) of the amending Act) by Finance Act 2007 (c. 11), Sch. 20 para. 8(3)

F44 Words in Sch. 28 para. 24(1B)(b) inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(3)(a)

F45 Words in Sch. 28 para. 24(1B)(b) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(3)(b)

F46 Words in Sch. 28 para. 24(2) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(4)(a)

F47 Words in Sch. 28 para. 24(2) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(4)(b)

F48 Words in Sch. 28 para. 24(4) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(4)(a)

F49 Words in Sch. 28 para. 24(4) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(4)(b)

F50 Words in Sch. 28 para. 24(4)(a) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 22(2)(a), 64(1)

F51 Words in Sch. 28 para. 24(4)(b) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 22(2)(b), 64(1)

F52 Words in Sch. 28 para. 24(5) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(5)(a)

F53 Words in Sch. 28 para. 24(5) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(5)(b)

F54 Words in Sch. 28 para. 24(6) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(6)(a)

F55 Words in Sch. 28 para. 24(6) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(6)(b)

F56 Sch. 28 para. 24(6A) inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(7)

F57 Words in Sch. 28 para. 24(7) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(8)

F58 Words in Sch. 28 para. 24(8) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(9)(a)

F59 Words in Sch. 28 para. 24(8) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(9)(b)

F60 Sch. 28 para. 24(8A) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 22(3), 64(1)

F61 Words in Sch. 28 para. 24(8A) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(10)

F62 Words in Sch. 28 para. 24(9) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 22(4), 64(1)

F63 Words in Sch. 28 para. 24(9)(b) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(11)

F64 Sch. 28 para. 24(11) inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 18(12)

Modifications etc. (not altering text)

C13 Sch. 28 para. 24 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 3, 5(1)(3)

C14 Sch. 28 para. 24 modified (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 98(2)(b)

C15 Sch. 28 para. 24(4) applied (with modifications) (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 98(7)

C16 Sch. 28 para. 24(7)-(8A) modified (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 98(8)

[F65 24A (1) This paragraph applies in relation to drawdown pension years beginning after the dependant's 75th birthday. U.K.

(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”.

(9) Nothing in this paragraph applies in respect of an arrangement to which section 167(2A) applies.

Textual Amendments

F65 Sch. 28 paras. 24A, 24B inserted (with effect in accordance with Sch. 16 paras. 85, 99(3) of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 19

24B (1) This paragraph applies if the dependant has reached the age of 75. U.K.

(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.]

Textual Amendments

F65 Sch. 28 paras. 24A, 24B inserted (with effect in accordance with Sch. 16 paras. 85, 99(3) of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 19

[F66 Minimum income requirement U.K.

Textual Amendments

F66 Sch. 28 paras. 24C-24G and cross-headings inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 20

24C (1) The dependant satisfies the minimum income requirement at any time in a tax year if the amount of relevant income payable to the dependant for that tax year is not less than the minimum income threshold. U.K.

(2) The minimum income threshold is £20,000.

(3) “Relevant income” means any of the following kinds of income—

(a) payments of a scheme pension or dependants’ scheme pension provided by a registered pension scheme;

(b) payments of a lifetime annuity or dependants’ annuity made by a registered pension scheme;

(c) payments under an overseas pension scheme which, if the scheme were a registered pension scheme, would fall within paragraph (a) or (b);

(d) payments of a social security pension;

(e) payments under the financial assistance scheme which are payable until the dependant’s death;

(f) payments made under that scheme in anticipation of, and on account of, payments falling within paragraph (e).

(4) But “relevant income” does not include—

(a) drawdown pension or dependants’ drawdown pension, or

(b) any payments under an overseas pension scheme which, if the scheme were a registered pension scheme, would be drawdown pension or dependants’ drawdown pension.

(5) A payment of any pension or annuity within sub-paragraph (3), or a payment under the financial assistance scheme, is not to be regarded as relevant income unless the dependant has, at any time before the time mentioned in sub-paragraph (1), already received a payment of that pension or annuity or (as the case may be) a payment under that scheme.

(6) For the purposes of sub-paragraph (1), the amount of any relevant income payable in a currency other than sterling is to be taken to be the equivalent amount in sterling, calculated by reference to an appropriate spot rate of exchange prevailing on the relevant day.

(7) In this paragraph—

• “financial assistance scheme” means the scheme provided for by regulations under section 286 of the Pensions Act 2004;

• “social security pension” means—

  (a)

  any pension, benefit or allowance to which section 577 of ITEPA 2003 applies, and

  (b)

  any pension, benefit or allowance which—

  (i)

  is payable under the law of a country or territory outside the United Kingdom, and

  (ii)

  is substantially similar in character to a pension, benefit or allowance to which that section applies.

(8) Any regulations made under paragraph 7 of Schedule 34 (application of Part 4 of this Act in relation to relevant non-UK schemes) have effect for the purposes of sub-paragraphs (3)(c) and (4)(b) of this paragraph as they have effect for the purposes of that Schedule.

Textual Amendments

F66 Sch. 28 paras. 24C-24G and cross-headings inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 20

24D (1) The Treasury may by order amend paragraph 24C(2) so as to substitute a different amount for the amount for the time being specified as the minimum income threshold. U.K.

(2) The Treasury may by regulations—

(a) amend paragraph 24C so as to add, vary or remove descriptions of payments which are relevant income;

(b) provide that in prescribed circumstances the whole or part of any relevant payment, or any relevant payment of a prescribed description, is not to be regarded as relevant income.

(3) In this paragraph—

• “prescribed” means prescribed in regulations made by the Treasury;

• “relevant payment” means a payment falling within paragraph 24C(3).

Textual Amendments

F66 Sch. 28 paras. 24C-24G and cross-headings inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 20

The relevant day U.K.

24E U.K. “The relevant day” means—

(a) in a case where subsection (2A) of section 167 has not previously applied to an arrangement relating to the dependant, the day on which the declaration referred to in paragraph (b) of that subsection is made, and

(b) in a case where subsection (2A) of that section has previously applied to such an arrangement, the day on which that subsection first so applied.

Textual Amendments

F66 Sch. 28 paras. 24C-24G and cross-headings inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 20

Relevant contributions U.K.

24F U.K. “Relevant contributions” means—

(a) relievable pension contributions paid by or on behalf of the dependant, or

(b) contributions paid in respect of the dependant by an employer of the dependant.

Textual Amendments

F66 Sch. 28 paras. 24C-24G and cross-headings inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 20

Valid and accepted declarations U.K.

24G (1) A declaration is “valid” if it complies with such requirements as may be prescribed by regulations made by the Commissioners for Her Majesty’s Revenue and Customs. U.K.

(2) A declaration is accepted by the scheme administrator of a registered pension scheme if, as a result of the making of the declaration, the dependant becomes eligible to receive payments of dependants’ drawdown pension in respect of an arrangement under the scheme which, but for the application of section 167(2A), would be unauthorised member payments.]

Textual Amendments

F66 Sch. 28 paras. 24C-24G and cross-headings inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 20

Dependant’s alternatively secured pension fund U.K.

F67 25 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F67 Sch. 28 paras. 25-27 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. 78(d)

Alternatively secured pension year and basis amount for alternatively secured pension year U.K.

F67 26 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F67 Sch. 28 paras. 25-27 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. 78(d)

F67 27 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F67 Sch. 28 paras. 25-27 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. 78(d)