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

Schedule 36 to FA 2004

8.—(1) Schedule 36 to FA 2004 (pension schemes etc: transitional provision and savings)(1) is amended as follows.

(2) Omit paragraph 6A (enhancement of lump sum allowance and lump sum and death benefit allowance) and the italic heading before it.

(3) In paragraph 7 (primary protection)—

(a) for sub-paragraphs (2) and (3) substitute—

“(2) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if—

(a) the amount specified in section 637P of that Act (individual’s lump sum allowance) were £375,000, and

(b) the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were the individual’s enhanced lump sum and death benefit allowance (as determined under paragraph 20H of this Schedule).

(3) For the purposes of paragraph 20H—

(a) the individual’s “protected lump sum and death benefit allowance” is £1,800,000;

(b) a lump sum and death benefit allowance enhancement factor, determined in accordance with sub-paragraphs (4) to (7) of this paragraph, operates in relation to the individual.”;

(b) in sub-paragraph (6), after “pre-commencement” insert “pension”;

(c) in sub-paragraph (8)(b) omit “immediately before the lump sum is paid,”.

(4) In paragraph 12 (enhanced protection)—

(a) for sub-paragraph (3A) substitute—

“(3A) Where this paragraph applies in the case of an individual—

(a) this Part of this Act, and

(b) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes),

have effect in relation to the individual with the modifications specified in paragraph 12A.”;

(b) omit sub-paragraphs (3B) to (3H).

(5) After paragraph 12 insert—

“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).

(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.”.”.

(6) In paragraph 18 (pre-commencement pension credits)—

(a) for sub-paragraphs (2) and (3) substitute—

“(2) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if—

(a) the amount specified in section 637P of that Act (individual’s lump sum allowance) were the lower of—

(i) an amount equal to £268,275 increased by the pre-commencement pension credit factor determined under sub-paragraph (5), and

(ii) £375,000, and

(b) the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were the individual’s enhanced lump sum and death benefit allowance (as determined under paragraph 20H of this Schedule).

(3) For the purposes of paragraph 20H a lump sum and death benefit allowance enhancement factor, determined in accordance with sub-paragraphs (4) to (6) of this paragraph, operates in relation to the individual.”;

(b) in sub-paragraph (7) omit “, immediately before the lump sum is paid,”.

(7) In paragraph 19 (individuals permitted to take pension before normal minimum pension age)—

(a) in sub-paragraph (1B), for “£268,275” substitute “the amount determined under sub-paragraph (1C)”;

(b) after that sub-paragraph insert—

“(1C) That amount is the amount —

(a) £268,275, or

(b) in a case where, disregarding sub-paragraph (1B), section 637P of ITEPA 2003 (individual’s lump sum allowance) would apply in relation to the individual as if it specified another amount, that amount.””;

(c) in sub-paragraph (2), for “Where the event is a relevant benefit crystallisation event, section” substitute “Section”.

(8) In paragraph 20 (pre-commencement pensions)—

(a) in sub-paragraph (1)—

(i) in the words before paragraph (a), for “who, on 5th April 2006—” substitute “where—”;

(ii) in paragraph (a), at the beginning, insert “on 5th April 2006, the individual”;

(b) in sub-paragraph (1A), in paragraph (b), for “amount of the lump sum to which the relevant benefit crystallisation event relates” substitute “non-taxable amount in relation to the relevant crystallisation event”;

(c) in sub-paragraph (2), in paragraph (b), for “amount of the lump sum or lump sum death benefit to which the relevant benefit crystallisation event relates” substitute “non-taxable amount in relation to the relevant crystallisation event”.

(9) In paragraph 20A (pension credits from previously crystallised rights)—

(a) in sub-paragraph (1), in the words before paragraph (a) omit “in relation to a relevant benefit crystallisation event occurring”;

(b) for sub-paragraph (3) substitute—

“(3) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were the individual’s enhanced lump sum and death benefit allowance (as determined under paragraph 20H of this Schedule).

(3A) For the purposes of paragraph 20H, a lump sum and death benefit allowance enhancement factor, determined in accordance with sub-paragraphs (4) to (6) of this paragraph, operates in relation to the individual.”;

(c) in sub-paragraph (8) omit “, immediately before the lump sum is paid,”.

(10) In paragraph 20B (non-residence: general)—

(a) in sub-paragraph (1), in the words before paragraph (a) omit “in relation to a relevant benefit crystallisation event occurring”;

(b) for sub-paragraph (2) substitute—

“(2) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were the individual’s enhanced lump sum and death benefit allowance (as determined under paragraph 20H of this Schedule).

(2A) For the purposes of paragraph 20H, a lump sum and death benefit allowance enhancement factor, determined in accordance with paragraphs 20C and 20D, operates in relation to the individual.”;

(c) omit sub-paragraphs (3) and (4);

(d) in sub-paragraph (8) omit “, immediately before the lump sum is paid,”.

(11) In paragraph 20C (non-residence: money purchase arrangements)—

(a) in the heading, for “money purchase arrangements” substitute “determination of lump sum and death benefit allowance enhancement factor (money purchase arrangements)”;

(b) for sub-paragraph (1) substitute—

“(1) This paragraph contains provision for determining the lump sum and death benefit allowance enhancement factor mentioned in paragraph 20B(2A) in the case of an arrangement that is a money purchase arrangement.”.

(12) In paragraph 20D (non-residence: other arrangements)—

(a) in the heading, for “other arrangements” substitute “determination of lump sum and death benefit allowance enhancement factor (other arrangements)”;

(b) for sub-paragraph (1) substitute—

“(1) This paragraph contains provision for determining the lump sum and death benefit allowance enhancement factor mentioned in paragraph 20B(2A) in the case of an arrangement that is not a money purchase arrangement.”.

(13) In paragraph 20E (transfers from recognised overseas pension scheme: general)—

(a) in sub-paragraph (1), in the words before paragraph (a) omit “in relation to a relevant benefit crystallisation event occurring”;

(b) for sub-paragraph (4) substitute—

“(4) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were the individual’s enhanced lump sum and death benefit allowance (as determined under paragraph 20H of this Schedule).

(4A) For the purposes of paragraph 20H, a lump sum and death benefit allowance enhancement factor, determined in accordance with sub-paragraphs (5) and (6) of this paragraph, operates in relation to the individual.”;

(c) in sub-paragraph (9) omit “, immediately before the lump sum is paid,”;

(d) in sub-paragraph (10), in paragraph (a) of the definition of A omit “(see paragraph 6A(4))”.

(14) In paragraph 20F (overseas transfer schemes: money purchase arrangements)—

(a) in the heading, for “money purchase arrangements” substitute “determination of relevant relievable amount (money purchase arrangements)”;

(b) for sub-paragraph (1) substitute—

“(1) This paragraph contains provision for determining the relevant relievable amount mentioned in the definition of B in paragraph 20E(6) in the case of a recognised overseas scheme arrangement that was a money purchase arrangement.”.

(15) In paragraph 20G (overseas transfer schemes: other arrangements)—

(a) in the heading, for “other arrangements” substitute “determination of relevant relievable amount (other arrangements)”;

(b) for sub-paragraph (1) substitute—

“(1) This paragraph contains provision for determining the relevant relievable amount mentioned in the definition of B in paragraph 20E(6) in the case of a recognised overseas scheme arrangement that was not a money purchase arrangement.”.

(16) After paragraph 20G insert—

“Individual’s enhanced lump sum and death benefit allowance

20H.— (1) This paragraph applies for determining the amount of the “enhanced lump sum and death benefit allowance” of an individual in relation to whom one or more lump sum and death benefit allowance enhancement factors operate.

(2) The individual’s “enhanced lump sum and death benefit allowance” is—

where—

• A is—

  (a)

  in the case of an individual in relation to whom a relevant protection provision applies, the individual’s protected lump sum and death benefit allowance (as defined in that provision);

  (b)

  B is the aggregate of the lump sum and death benefit allowance enhancement factors that operate in relation to the individual.

(3) The following provisions are “relevant protection provisions”—

(a) paragraph 7 of this Schedule (primary protection)(2);

(b) paragraph 14 of Schedule 18 to FA 2011 (fixed protection)(3);

(c) paragraph 1 of Schedule 22 to FA 2013 (“fixed protection 2014”)(4);

(d) paragraph 1 of Schedule 6 to FA 2014 (“individual protection 2014”)(5);

(e) paragraph 1 of Schedule 4 to FA 2016 (“fixed protection 2016”)(6);

(f) paragraph 9 of that Schedule (“individual protection 2016”).

(4) The following paragraphs of this Schedule make provision for the operation of a lump sum and death benefit allowance enhancement factor in relation to an individual—

(a) paragraph 7 (primary protection),

(b) paragraph 18 (pre-commencement pension credits),

(c) paragraph 20A (pension credits from previously crystallised rights),

(d) paragraph 20B (non-residence: general), and

(e) paragraph 20E (transfers from recognised overseas pension scheme: general).”.

(17) In paragraph 24 (lump sum rights exceeding £375,000: primary and enhanced protection), in sub-paragraph (1) omit paragraph (b) and the “and” before it.

(18) For paragraph 27 (pre-commencement benefit rights: enhanced protection: permitted maximum) substitute—

“27.— (1) If (and for so long as) paragraph 12 (enhanced protection) applies in relation to the individual, Schedule 29 to FA 2004 (authorised lump sums - supplementary) has effect in relation to the individual as if—

(a) in paragraph 1(1)(b) (pension commencement lump sum), the words “all or part of the member’s lump sum allowance is available, and” were omitted;

(b) for paragraph 2 (pension commencement lump sum: definition of “permitted maximum”) there were substituted—

“2.— (1) In paragraph 1 “the permitted maximum”, in relation to a lump sum, means the lower of—

(a) the applicable amount in relation to the relevant pension (see paragraphs 2A to 2D), and

(b) the amount specified in sub-paragraph (2).

(2) That amount is—

(a) the maximum amount of a pension commencement lump sum that could have been paid to the member on 5th April 2023 under the arrangement under which the entitlement to the lump sum arises, less

(b) the aggregate of each pension commencement lump sum (if any) to which the member has previously become entitled after that date under that arrangement,

or, if that produces a negative amount, nil.

(3) For the purposes of this paragraph, the maximum amount of a pension commencement lump sum that “could have been paid” on 5th April 2023 is to be determined on the assumption that any condition required to be met before such a payment could be made was met.

(4) Sub-paragraphs (5) and (6) apply where—

(a) it is necessary to determine for the purposes of this paragraph “the permitted maximum” in relation to a pension commencement lump sum paid after 5th April 2023 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 2023 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) The reference in sub-paragraph (2)(a) to the maximum amount of a pension commencement lump sum that could have been paid on 5th April 2023 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 pension commencement lump sum 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 in sub-paragraph (2)(b) to a pension commencement lump sum to which the member has become entitled under the paying arrangement before the date on which the lump sum is paid includes a reference to a pension commencement lump sum paid under a predecessor arrangement, so far as it is referable to sums and assets applied for the provision of the pension commencement lump sum paid under the paying arrangement.

(7) In this paragraph “the post-5th April 2023 period”, in relation to a lump sum, means the period beginning with 6 April 2023 and ending with the date on which the lump sum is paid.”.

(2) If (and for so long as) Schedule 29 applies in relation to the individual subject to the modifications in sub-paragraph (1), paragraph 12A of this Schedule has effect in relation to the individual as if sub-paragraph (2)(a) of that paragraph (which contains modifications of Schedule 29 inconsistent with those in sub-paragraph (1)) were omitted.”.

(19) In paragraph 28 (pre-commencement benefit rights: no enhanced protection: permitted maximum), before sub-paragraph (1) insert—

“(A1) If paragraph 12 (enhanced protection) does not apply in relation to the individual, Schedule 29 to FA 2004 (authorised lump sums - supplementary) has effect in relation to the individual as if in paragraph 1(1)(b) (pension commencement lump sum), the words “all or part of the member’s lump sum allowance is available, and” were omitted.”.

(1)

Paragraph 6A was inserted by paragraph 67 of Schedule 9 to FA 2024. Paragraph 7 was substituted by paragraph 68 of Schedule 9 to FA 2024. Paragraph 12 was amended by paragraph 53 of Schedule 10 to FA 2005 (c. 7), paragraph 17 of Schedule 20 to FA 2007 (c. 11), paragraph 432 of Schedule 1 to the Corporation Tax Act 2010 (c. 4), paragraph 59 of Schedule 26 to the Equality Act 2010 (c. 15) and section 23(2) of FA (No. 2) Act 2023 (c. 30). Sub-paragraphs (3A) to (3H) of paragraph 12 were substituted by paragraph 71 of Schedule 9 to FA 2024. Paragraph 18 was substituted by paragraph 75 of Schedule 9 to FA 2024. Paragraph 19 was amended by paragraph 76 of Schedule 9 to FA 2024. Paragraphs 20A to 20G were inserted by paragraph 78 of Schedule 9 to FA 2024. Paragraph 24 was amended by paragraph 81 of Schedule 9 to FA 2024. Paragraph 27 was substituted by paragraph 82 of Schedule 9 to FA 2024. Paragraph 28 was amended by paragraph 83 of Schedule 9 to FA 2024.

(2)

Paragraph 7 of Schedule 36 was substituted by paragraph 68 of Schedule 9 to FA 2024.

(3)

2011 c. 11. Paragraph 14 of Schedule 18 was amended by section 47(2) of FA 2013 (c. 29), section 23(5) of FA (No. 2) 2023 (c. 30), paragraph 90 of Schedule 9 to FA 2024 and by S.I. 2013/1740.

(4)

2013 c. 29. Paragraph 1 of Schedule 22 was amended by section 23(6) of FA (No. 2) Act 2023 (c. 30). The existing paragraph 1 was substituted by paragraph 91 of Schedule 9 to FA 2024.

(5)

2014 c. 26. Paragraph 1 of Schedule 6 was substituted by paragraph 92 of Schedule 9 to FA 2024.

(6)

2016 c. 24. Paragraph 1 of Schedule 4 was substituted by paragraph 93 of Schedule 9 to FA 2024. Paragraph 9 of that Schedule was amended by paragraph 93 of Schedule 9 to FA 2024