Finance Act 2004

[F1 12A (1) The following provisions of this paragraph specify the modifications of this Part of this Act, and of Chapter 15A of Part 9 of ITEPA 2003, that apply in accordance with paragraph 12(3A) (modifications applying in relation to individual with enhanced protection). U.K.

(2) Schedule 29 (authorised lump sums) has effect as if—

(a) in paragraph 2 (pension commencement lump sums: definition of “permitted maximum”)—

(i) the existing text became sub-paragraph (1);

(ii) in that sub-paragraph, paragraph (c) were omitted;

(iii) after that sub-paragraph there were inserted—

“(2) In the case of an individual who has previously become entitled to a serious ill-health lump sum under the arrangement under which the entitlement to the lump sum arises—

(a) sub-paragraph (1) does not apply, and

(b) in paragraph 1 “the permitted maximum”, in relation to a lump sum, is nil.””;

(b) in paragraph 4A (uncrystallised funds pension lump sum), after sub-paragraph (1) there were inserted—

“(1A) But a lump sum is not an uncrystallised funds pension lump sum if the lump sum condition (see paragraphs 24(2) and (3), 25 and 26 of Schedule 36) is met in relation to the member.”

(3) Chapter 15A of Part 9 of ITEPA 2003 has effect as if—

(a) in section 637C (serious ill-health lump sums), in subsection (3), for the words from “so much of” to the end there were substituted “the maximum amount of a serious ill-health lump sum that could have been paid to the member on 5th April 2024 under the arrangement under which the entitlement to the lump sum arises”;

(b) in section 637D (uncrystallised funds pension lump sums)—

(i) in subsection (3), for paragraph (b) there were substituted—

“(b) the maximum amount of an uncrystallised funds pension lump sum that could have been paid to the member with no liability to income tax on 5th April 2024 under the arrangement under which the entitlement to the lump sum arises.”;

(ii) after that subsection there were inserted—

“(4) In the case of an individual who has previously become entitled to a serious ill-health lump sum under the arrangement under which the entitlement to the lump sum arises—

(a) subsection (3) does not apply, and

(b) in subsection (2) “the permitted maximum”, in relation to an uncrystallised funds pension lump sum paid to a member, is nil.””;

(c) in section 637H (defined benefits lump sum death benefits), in subsection (7), for the definition of “the permitted maximum” there were substituted—

• ““the permitted maximum”, in relation to a defined benefits lump sum death benefit paid in respect of a member, means—

  (a)

  the maximum amount of a defined benefits lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

  (b)

  the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

  or, if that produces a negative result, nil.”;

(d) in section 637I (pension protection lump sum death benefits), in subsection (5), for the definition of “the permitted maximum” there were substituted—

• ““the permitted maximum”, in relation to a pension protection lump sum death benefit paid in respect of a member, means—

  (a)

  the maximum amount of a pension protection lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

  (b)

  the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

  or, if that produces a negative result, nil.”;

(e) in section 637J (uncrystallised funds lump sum death benefits), in subsection (7), for the definition of “the permitted maximum” there were substituted—

• ““the permitted maximum”, in relation to an uncrystallised funds lump sum death benefit paid in respect of a member, means—

  (a)

  the maximum amount of an uncrystallised funds lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

  (b)

  the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

  or, if that produces a negative result, nil.”;

(f) in section 637K (annuity protection lump sum death benefits), in subsection (5), for the definition of “the permitted maximum” there were substituted—

• ““the permitted maximum”, in relation to an annuity protection lump sum death benefit paid in respect of a member, means—

  (a)

  the maximum amount of an annuity protection lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

  (b)

  the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

  or, if that produces a negative result, nil.”;

(g) in section 637L (drawdown pension fund lump sum death benefits), in subsection (8), for the definition of “the permitted maximum” there were substituted—

• ““the permitted maximum”, in relation to a drawdown pension fund lump sum death benefit paid in respect of a member, means—

  (a)

  the maximum amount of a drawdown pension fund lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

  (b)

  the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

  or, if that produces a negative result, nil.”;

(h) in section 637M (flexi-access drawdown lump sum death benefits), in subsection (8), for the definition of “the permitted maximum” there were substituted—

• ““the permitted maximum”, in relation to a flexi-access drawdown lump sum death benefit paid in respect of a member, means—

  (a)

  the maximum amount of a flexi-access drawdown lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

  (b)

  the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

  or, if that produces a negative result, nil.”;

(i) in section 637P (individual’s lump sum allowance), for “£268,275” there were substituted “£375,000”;

(j) in section 637R (individual’s lump sum and death benefit allowance)—

(i) the existing text became subsection (1);

(ii) in that subsection, for “£1,073,100” there were substituted “an amount equal to the value of the individual’s uncrystallised rights on 5 April 2024”;

(iii) after that subsection there were inserted—

“(2) In this section “uncrystallised rights” has the same meaning as in section 212 of FA 2004; and the value for the purposes of this section of any uncrystallised rights is to be calculated in accordance with that section.”;

(k) after section 637T (section 637S: multiple lump sum death benefits paid) there were inserted—

637U “Interpretation of Chapter

(1) A reference in this Chapter to the maximum amount of a lump sum that “could have been paid” on 5th April 2024, in the case of—

(a) a serious ill-health lump sum paid under a defined benefits arrangement, or

(b) a lump sum death benefit of any description paid under such an arrangement,

is a reference to an amount equal to the appropriate limit in relation to becoming entitled to a lump sum of that description on that date, determined under paragraph 15(4) of Schedule 36 to FA 2004.

(2) For the purposes of this Chapter, the maximum amount of a lump sum of any description that “could have been paid” on 5th April 2024 is to be determined on the assumption that any condition required to be met before such a payment could be made was met.

(3) In the definitions of “the permitted maximum” in sections 637H, 637I, 637J, 637K, 637L and 637M, and in this section—

(a) “relevant lump sum death benefit” has the meaning given by section 637S(2)(c);

(b) “non-taxable amount”, in relation to the payment of a relevant lump sum death benefit, has the meaning given by section 637S(6);

(c) “the post-5th April 2024 period”, in relation to a lump sum, means the period beginning with 6 April 2024 and ending with the date on which the lump sum is paid.

(4) Subsections (5) and (6) apply where—

(a) it is necessary to determine for the purposes of any provision of this Chapter “the permitted maximum” in relation to a lump sum of any description paid after 5th April 2024 under an arrangement (“the paying arrangement”) under a registered pension scheme, and

(b) as a result of one or more recognised transfers made in the post-5th April 2024 period, any of the sums and assets applied for the provision of the lump sum were, at any time before the payment of the lump sum, held for the purposes of another arrangement (“a predecessor arrangement”) under a different registered pension scheme.

(5) A reference to the maximum amount of a lump sum of any description that could have been paid on 5th April 2024 under the paying arrangement, so far as the lump sum paid is referable to sums and assets that were held on that date for the purposes of a predecessor arrangement, is a reference to the maximum amount of a lump sum of that description that could have been paid on that date under that predecessor arrangement, had those sums and assets (and only those sums and assets) been applied for the provision of the lump sum.

(6) A reference to a relevant benefit crystallisation event occurring under the paying arrangement before the date on which the lump sum is paid includes a reference to a relevant benefit crystallisation event occurring under a predecessor arrangement, so far as the relevant benefit crystallisation event is referable to sums and assets applied for the provision of the lump sum.

(7) In this section a reference to a lump sum includes a lump sum death benefit.”.]

Textual Amendments

F1 Sch. 36 para. 12A inserted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024 (S.I. 2024/1012), regs. 1(2)(3), 8(5)