The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024

The Taxation of Pension Schemes (Transitional Provisions) Order 2006

25.—(1) The Taxation of Pension Schemes (Transitional Provisions) Order 2006(1) is amended as follows.

(2) In article 1 (citation and commencement), in paragraph (2), after the entry for “Part 4” insert—

““relevant benefit crystallisation event” has the same meaning as in section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance);”.

(3) For article 7 (modification of section 636A ITEPA 2003) substitute—

“Modification of Chapter 15A of ITEPA 2003

7.   Chapter 15A of ITEPA 2003 (lump sums under registered pension schemes) has effect as if, after section 637N, there were inserted—

“637NA.    Life cover lump sums

(1) No liability to income tax arises on a life cover lump sum.”.”.

(4) In article 10 (modification of section 212), in paragraph (1), for “paragraph 7(3)” substitute “paragraph 7(5)”.

(5) In article 11 (modification of paragraph 8 of Schedule 36), in paragraph (1), for “lifetime allowance charge” substitute “enhancement of allowances etc”.

(6) In article 12 (“primary protection” and non residents)—

(a) in paragraph (2)—

(i) in Condition A, for “section 221(6) of his intention to rely on that section” substitute “sub-paragraph (1)(b) of paragraph 20B of Schedule 36 of the individual’s intention to rely on that paragraph”;

(ii) in Condition B, for “section 221(3) had that subsection” substitute “sub-paragraph (5) of paragraph 20B of Schedule 36 had that sub-paragraph”;

(b) in paragraph (3)—

(i) in Condition B, for “section 221(6) that he intends to rely on that section” substitute “sub-paragraph (1)(b) of paragraph 20B of Schedule 36 that the individual intends to rely on that paragraph”;

(ii) in Condition C, for “section 221(3) had that subsection” substitute “sub-paragraph (5) of paragraph 20B of Schedule 36 had that sub-paragraph”.

(7) For article 13 (modification of section 222) substitute—

“Modification of paragraph 20C of Schedule 36

13.   Paragraph 20C of Schedule 36 to the 2004 Act (non-residence: money purchase arrangements) has effect as if—

(a) in sub-paragraph (4), for the definition of B there were substituted—

““B” is the value of the individual's rights under the arrangement on 5th April 2006 calculated in accordance with sub-paragraph (5)(b) multiplied by 0.7154.”;

(b) for sub-paragraph (5)(b) there were substituted—

“(b) the value of the individual's rights under the arrangement on 5th April 2006 is the amount which would, on the valuation assumptions, be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits on 5th April 2006.”.(2)”.

(8) For article 14 (modification of section 223) substitute—

“Modification of paragraph 20D of Schedule 36

14.   Paragraph 20D of Schedule 36 to the 2004 Act (non-residence: other arrangements) has effect as if—

(a) in sub-paragraph (4), in the definitions of D and E, for “at the beginning of that part of that period” there were substituted “on 5th April 2006 increased in accordance with sub-paragraph (4A)”;

(b) after sub-paragraph (4) there were inserted—

“(4A) D and E are increased by multiplying the appropriate figure by 0.7154.”.”.

(9) In article 18 (“enhanced protection” and pension commencement lump sums), for “lifetime allowance” substitute “all or part of lump sum allowance and all or part of lump sum and death benefit allowance”.

(10) Omit article 19 (pre-commencement pension and calculation of the “permitted maximum” pension commencement lump sum).

(11) In article 20 (pre-commencement lump sum death benefits)—

(a) in paragraph (2)—

(i) in Condition B, after “benefit crystallisation event” insert “within the meaning of Part 4 of FA 2004 as that Part had effect immediately before 6 April 2024, and no relevant benefit crystallisation event,”;

(ii) in Condition C, before “benefit crystallisation event” insert “relevant”;

(b) in paragraph (3), for “amount crystallised was” substitute “amount of the lump sum death benefit to which the relevant benefit crystallisation event mentioned in Condition C relates was 25% of”.

(12) In article 23ZC (individual becomes entitled to the pensions), for paragraph (2) substitute—

“(2) For section 166(2)(a) (lump sum rule) substitute—

“(a) in the case of a pension commencement lump sum or a pension commencement excess lump sum, immediately before the person becomes entitled to the last of the pensions in connection with which it is paid (or, if the person dies before becoming entitled to the last of the pensions in connection with which it was anticipated it would be paid, immediately before death),”.”.

(13) In article 23ZE (individual dies after becoming entitled to at least one but not all of the pensions), for paragraph (2) substitute—

“(2) For section 166(2)(a) (lump sum rule) substitute—

“(a) in the case of a pension commencement lump sum or a pension commencement excess lump sum, immediately before the person becomes entitled to any of the pensions in connection with which it was anticipated that it would be paid,”.”.

(14) In article 23C (modifications of Schedule 29 to FA 2004), in paragraph (4), in inserted paragraph 7A(1)(c), for “lifetime allowance” substitute “lump sum allowance”.

(15) In article 23D (modifications of Schedule 36 to FA 2004) omit paragraph (3).

(16) In paragraph (2) of article 25CA (circumstance A: tax treatment of stand-alone lump sums), in the inserted section 637GA of ITEPA 2003, in subsection (3)(b), for “immediately before the individual becomes” substitute “on the individual becoming”.

(17) In paragraph (2) of article 25CC (circumstance C: tax treatment of stand-alone lump sums), in the inserted section 637GA of ITEPA 2003, in subsection (3)(b), for “immediately before the individual becomes” substitute “on the individual becoming”.

(18) In article 28 (pre-existing entitlement to lump sums and deferment)—

(a) in paragraph (2), in Condition D—

(i) before “benefit crystallisation event” insert “relevant”;

(ii) for “6th April 2006” substitute “6th April 2024”;

(b) in paragraph (3)(a) omit the inserted sub-paragraph (1AA) of paragraph 1 of Schedule 29 to FA 2004.

(19) In article 29 (member’s unsecured pension funds)—

(a) in paragraph (3) omit sub-paragraph (b);

(b) omit paragraph (5).

(20) In article 29A (member’s unsecured pension funds - further provision) omit paragraph (3).

(21) In article 33 (serious ill-health lump sums, pension protection lump sum death benefits and annuity protection lump sum death benefits—

(a) in paragraph (3), for ““there has been no previous benefit crystallisation event”” substitute ““the member has not previously become entitled to any pension or lump sum””;

(b) for paragraphs (4) and (5) substitute—

“(4) In paragraph 14(3) of Schedule 29 (pension protection lump sum death benefit)—

(a) in the formula, for “AC” substitute “PCPR”;

(b) for the definition of AC substitute—

“PCPR is the value of the individual’s pre-commencement pension rights as defined in paragraph 20(3) to (5) of Schedule 36.”.

(5) In paragraph 16(3) of Schedule 29 (annuity protection lump sum death benefit)—

(a) in the formula, for “AC” substitute “PCPR”;

(b) for the definition AC substitute—

“PCPR is the value of the individual’s pre-commencement pension rights as defined in paragraph 20(3) to (5) of Schedule 36.”.

(c) in the definition of “AP”, for “the member becoming entitled to the pension or annuity” substitute “6th April 2006”.”.

(22) In article 37 (modification of section 636B of ITEPA 2003)—

(a) in the heading, for “section 636B” substitute “section 637G”;

(b) in paragraph (1), for “section 636B” substitute “section 637G”;

(c) for paragraph (2) substitute—

“(2) In the heading, at the end insert “etc”.”;

(d) for paragraph (4) substitute—

“(4) In subsection (4), after “In this section” insert “—

““equivalent pension benefits commutation lump sum” means a lump sum payment arising from the commutation of equivalent pension benefits pursuant to—

(a)

regulation 2(1A) of the Occupational Pension Schemes (Assignment, Forfeiture, Bankruptcy etc.) Regulations 1997(3), or

(b)

regulation 2(1A) of the Occupational Pension Schemes (Assignment, Forfeiture, Bankruptcy etc.) Regulations (Northern Ireland) 1997(4);”.”.

(23) Omit articles 38 and 39 (which relate to lump sum payments the entitlement to which arose before 6 April 2006 and are therefore no longer of practical utility).

(24) In article 40 (lump sum death benefits - death of a member)—

(a) omit paragraph (2);

(b) at the end insert—

“(6) In this article and article 41—

“the Commissioners” means the Commissioners for His Majesty’s Revenue and Customs and, in relation to times before 18th April 2005, includes the Commissioners of Inland Revenue;

“existing scheme” means a scheme which becomes a registered pension scheme by virtue of paragraph 1(1) of Schedule 36 (pension schemes etc.: transitional provisions and savings — deemed registration of existing schemes);

“member” means a member of an existing scheme.”.

(25) Omit articles 44 and 45 (normal minimum pension age: modification of section 165 and paragraph 1 of Schedule 29 to FA 2004).

(1)

S.I. 2006/572. Article 18 was amended by paragraph 12 of Schedule 5 to FA 2014. Articles 23ZC and 23ZE were inserted by S.I. 2011/732. Articles 23C and 23D were inserted by S.I. 2009/1172. Article 25C was amended by section 42(5) FA 2014 and paragraph 72 of Schedule 1 to the Taxation of Pensions Act 2014. Article 25D was amended by paragraph 34 of Schedule 23 to FA 2006 (c. 25). Articles 25CA and 25CC were inserted by paragraph 95 of Schedule 9 to FA 2024 and were amended by S.I. 2024/356. Article 29A was inserted by S.I. 2006/1962. Articles 40 and 41 were amended by S.I. 2006/1962. Articles 44 and 45 were inserted by S.I. 2011/732.

(2)

Paragraphs 20C and 20D of Schedule 36 were inserted by paragraph 78 of Schedule 9 to FA 2024.

(3)

S.I. 1997/785. Paragraph (1A) of regulation 2 was substituted by S.I. 2006/778.

(4)

S.R. 1997 No. 153. Paragraph (1A) of regulation 2 was substituted by S.R. 2006 No. 141.