The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 3) Regulations 2024

Schedule 36 to FA 2004

3.—(1) Schedule 36 to FA 2004 (transitional provision and saving)(1) is amended as follows.

(2) In paragraph 20 (pre-commencement pensions), after sub-paragraph (2) insert—

“(2A) Section 244IC (availability of member’s overseas transfer allowance)(2) applies as if, immediately before the first transfer of the kind mentioned in section 244IA(1)(a) made in relation to the member on or after 6th April 2024—

(a) a transfer of that kind had been made in relation to the member, and

(b) the transferred value of the transfer was an amount equal to 25% of the value of the member’s pre-commencement pension rights immediately before the transfer.”.

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

(a) for sub-paragraph (5) substitute—

“(5) The pension credit factor is—

where—

• A is the post-commencement pension in payment portion of the amount which is the appropriate amount for the purposes of section 29(1) of WRPA 1999 or Article 26(1) of WRP(NI)O 1999(3) in relation to the pension credit;

• SLA is the standard lifetime allowance for the tax year in which the rights mentioned in sub-paragraph (1)(a) were acquired.”;

(b) after sub-paragraph (9) insert—

“(10) A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year.”.

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

(a) in sub-paragraph (4)—

(i) in the formula, for “£1,000,000” substitute “SLA”;

(ii) after the definition of B insert—

“SLA is the standard lifetime allowance for the tax year in which that part of that period ended.”;

(b) in sub-paragraph (7)—

(i) in the formula, for “£1,000,000” substitute “SLA”;

(ii) after the definition of C insert—

“SLA is the standard lifetime allowance for the tax year in which that part of that period ended.”;

(c) after sub-paragraph (7) insert—

“(8) A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year.”.

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

(a) in sub-paragraph (4)—

(i) in the formula, for “£1,000,000” substitute “SLA”;

(ii) after the definition of E insert—

“SLA is the standard lifetime allowance for the tax year in which that part of that period ended.”;

(b) after sub-paragraph (7) insert—

“(8) A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year.”.

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

(a) in sub-paragraph (6)—

(i) in the formula, for “£1,000,000” substitute “SLA”;

(ii) after the definition of B insert—

“SLA is the standard lifetime allowance for the tax year in which the transfer took place.”;

(b) after sub-paragraph (10) insert—

“(11) A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year.”.

(7) In paragraph 31 (entitlement to lump sums exceeding 25% of uncrystallised rights)—

(a) in sub-paragraph (1), for “paragraph 34 (but subject to sub-paragraph (2))” substitute “paragraph 34(2) (but subject to sub-paragraph (2) of this paragraph and to paragraph 34(3))”;

(b) after sub-paragraph (1) insert—

“(1A) For provision about the tax treatment of a pension commencement lump sum the permitted maximum of which is determined under paragraph 2 of Schedule 29(4) as modified by paragraph 34(3), see paragraph 34A.”;

(c) in sub-paragraph (3)—

(i) the words after “The pension condition is that” become paragraph (a);

(ii) after that paragraph insert “, and

“(b) the individual does not become entitled to more than one pension commencement lump sum in connection with becoming entitled to those pensions.”.

(8) For paragraph 34 substitute—

“34.— (1) Sub-paragraphs (2) and (3) specify the modifications of the provisions of Schedule 29 relating to pension commencement lump sums that apply in accordance with paragraph 31(1) (entitlement to lump sums exceeding 25% of uncrystallised rights).

(2) Schedule 29 has effect 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.

(3) Subject to sub-paragraph (4), Schedule 29 has effect as if, for paragraph 2 (definition of “the permitted maximum”), there were substituted—

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

where—

• A is the value of the member’s uncrystallised lump sum rights under the pension scheme on 5th April 2006, calculated in accordance with paragraph 32 of Schedule 36;

• B is the additional lump sum amount (see sub-paragraphs (2) to (6) below).

(2) In sub-paragraph (1), “the additional lump sum amount” means—

where—

• C is the lump sum paid;

• D is the relevant capital amount in relation to the relevant pension (see sub-paragraph (6));

• E is the value of the member’s uncrystallised rights under the pension scheme on 5th April 2006, calculated in accordance with paragraph 33 of Schedule 36;

• F is the member’s lump sum and death benefit allowance.

(3) For the purposes of sub-paragraph (2), any part of what would otherwise be C which represents rights attributable to a disqualifying pension credit is to be disregarded.

(4) In a case in which the lump sum is paid in connection with the member becoming entitled to more than one relevant pension (within the meaning given by paragraph 1(3)), the reference in the definition of D in sub-paragraph (2) to the relevant capital amount in relation to the relevant pension is to the sum of the relevant capital amounts in relation to each of the relevant pensions.

(5) If the amount given by the formula in sub-paragraph (2) is negative, the additional lump sum amount is nil.

(6) In sub-paragraph (2) “the relevant capital amount” means—

(a) in a case in which the relevant pension is income withdrawal, the scheme pension capital value, as determined under paragraph 2A(3) and (4);

(b) in a case in which the relevant pension is a lifetime annuity, the annuity purchase price, as determined under paragraph 2B(3) and (4);

(c) in a case in which the relevant pension is a scheme pension under a defined benefits arrangement or a collective money purchase scheme, the amount given by the formula—

where B and C have the same meaning as they have for the purposes of paragraph 2C(2);

(d) in a case in which the relevant pension is a scheme pension under a money purchase arrangement that is not a collective money purchase arrangement, the scheme pension purchase price, as determined under paragraph 2D(3) and (4).”.

(4) If, in any case, the permitted maximum of a lump sum that is determined under paragraph 2 of Schedule 29 as modified by sub-paragraph (3) of this paragraph is lower than it would have been disregarding the modification, the modification is to be disregarded.”.

(9) After paragraph 34 (but before the italic heading after it) insert—

“34A.— (1) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes)(5) applies in relation to a paragraph 34 pension commencement lump sum as if—

(a) for section 637A (pension commencement lump sums), there were substituted—

“637A.    Pension commencement lump sums

(1) Subject to subsection (2), no liability to income tax arises on a pension commencement lump sum paid under a registered pension scheme.

(2) If—

(a) a pension commencement lump sum is paid under a registered pension scheme, and

(b) the lump sum exceeds the amount of the member’s lump sum and death benefit allowance that is available on the member becoming entitled to it,

section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.”;

(b) in section 637Q (availability of individual’s lump sum allowance), for subsection (6) there were substituted—

“(6) In subsection (5) “non-taxable amount”, in relation to the individual becoming entitled to a pension commencement lump sum, means the lower of—

(a) so much (if any) of the lump sum as is not subject to the charge to income tax by virtue of any provision of this Chapter, and

(b) the amount given by the formula—

where C and D have the same meaning as in sub-paragraph (3) of paragraph 2 of Schedule 29 to FA 2004 (definition of “the permitted maximum”)(6) as that paragraph applies in relation to the lump sum.

(6A) In subsection (5) “non-taxable amount”, in relation to the individual becoming entitled to an uncrystallised funds pension lump sum, means so much (if any) of the lump sum as is not subject to the charge to income tax by virtue of any provision of this Chapter.”.

(2) In sub-paragraph (1) “paragraph 34 pension commencement lump sum” means a pension commencement lump sum the permitted maximum of which is determined under paragraph 2 of Schedule 29 as modified by paragraph 34(3).”.

(1)

Paragraph 20 of Schedule 36 was amended by paragraph 82 of Schedule 16 to FA 2011 (c. 11), paragraphs 28 and 77 of Schedule 1 to the Taxation of Pensions Act 2014 (c. 30) and paragraph 77 of Schedule 9 to FA 2024. Paragraphs 20A to 20E were inserted by paragraph 78 of Schedule 9 to FA 2024. Paragraph 31 was amended by paragraph 55(6) of Schedule 10 to FA 2005 (c. 7) and paragraph 9 of Schedule 5 to FA 2014. Paragraph 34 was substituted by paragraph 87 of Schedule 9 to FA 2024 and amended by S.I. 2024/356. The application of paragraphs 31 and 34 were modified by S.I. 2006/572 in relation to certain cases.

(2)

Sections 244IA and 244IC of FA 2004 were inserted by paragraph 54 of Schedule 9 to FA 2024.

(3)

“WRPA 1999” and “WRP(NI)O 1999” are defined in section 280 of FA 2004.

(4)

Paragraph 2 of Schedule 29 was substituted by paragraph 26 of Schedule 9 to FA 2024.

(5)

Chapter 15A of Part 9 of ITEPA 2003 was inserted by paragraph 11 of Schedule 31 to FA 2004. The existing Chapter 15A was substituted for a new one consisting of sections 637 - 637S by paragraph 41 of Schedule 9 to FA 2024. Section 579A of ITEPA 2003 was inserted by paragraph 6 of Schedule 31 to FA 2004 and was amended by paragraph 25 of Schedule 2 to the Taxation of Pensions Act 2014 and by paragraph 22 of Schedule 4 to FA 2015 (c. 11). Paragraph 1 of Schedule 1 to ITEPA 2003 defines a reference to “FA” followed by a year as a reference to a Finance Act of that year. “ITEPA 2003” is defined in section 38 of FA 2024.

(6)

Paragraph 1 of Schedule 1 to ITEPA 2003 defines “FA” followed by a year as a reference to a Finance Act of that year.