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

Taxation of Pension Schemes (Transitional Provisions) Order 2006

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

(2) In article 21 (transfers and entitlement to lump sums exceeding 25% of uncrystallised rights), in paragraph (1), for “Articles 22 and 23 apply” substitute “Article 23 applies”.

(3) Omit article 22 (modification of paragraph 31 of Schedule 36).

(4) For article 23 (modification of paragraph 34 of Schedule 36) substitute—

“Modification of paragraph 34 of Schedule 36

23.— (1) Paragraph (2) below specifies modifications of paragraph 34 of Schedule 36 (entitlement to lump sums exceeding 25% of uncrystallised rights: definition of “permitted maximum” in relation to a pension commencement lump sum) that apply in the circumstances mentioned in article 21.

(2) In sub-paragraph (3), for sub-paragraph (1) of the modified paragraph 2 of Schedule 29, substitute—

“(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 (5));

• TV is the value of all sums and assets held for the purposes of, or representing accrued rights under, the pension scheme that have been transferred from it as mentioned in article 21(1)(b) of the Taxation of Pension Schemes (Transitional Provisions) Order 2006.”.”.

(5) In article 23ZA (pension commencement lump sums where no pension is paid before death)—

(a) in paragraph (2), in the substitute paragraph 31(3) of Schedule 36 to FA 2004—

(i) the words after “The pension condition is that, the scheme administrator considers that, had the individual not died” become paragraph (a);

(ii) after that paragraph insert “, and

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

(b) for paragraph (3) substitute—

“(3) In determining the amount of the additional lump sum amount under paragraph 2(2) of Schedule 29, as modified by paragraph 34(3) of Schedule 36 (entitlement to lump sums exceeding 25% of uncrystallised rights: definition of “permitted maximum” in relation to a pension commencement lump sum), it is to be assumed that the member became entitled immediately before death to the present payment of the relevant pension in connection with which the lump sum in question is paid.”.

(6) In article 23ZD (individual dies before becoming entitled to any of the pensions)—

(a) in paragraph (2), in the substitute paragraph 31(3) of Schedule 36 to FA 2004—

(i) the words after “The pension condition is that, the scheme administrator considers that, had the individual not died” become paragraph (a);

(ii) after that paragraph insert “, and

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

(b) for paragraph (3) substitute—

“(3) In determining the amount of the additional lump sum amount under paragraph 2(2) of Schedule 29, as modified by paragraph 34(3) of Schedule 36 (entitlement to lump sums exceeding 25% of uncrystallised rights: definition of “permitted maximum” in relation to a pension commencement lump sum), it is to be assumed that the member became entitled immediately before death to the present payment of each of the pensions in connection with which the lump sum in question is paid.”.

(7) In article 23ZE (individual dies after becoming entitled to at least one but not all of the pensions)—

(a) in paragraph (3), in the substitute paragraph 31(3) of Schedule 36 to FA 2004—

(i) the words after “The pension condition is that, the scheme administrator considers that, had the individual not died” become paragraph (a);

(ii) after that paragraph insert “, and

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

(b) for paragraph (4) substitute—

“(4) In determining the amount of the additional lump sum amount under paragraph 2(2) of Schedule 29, as modified by paragraph 34(3) of Schedule 36 (entitlement to lump sums exceeding 25% of uncrystallised rights: definition of “permitted maximum” in relation to a pension commencement lump sum), it is to be assumed that the member became entitled immediately before death to the present payment of each of the pensions in connection with which the lump sum in question is paid.”.

(8) In article 23D (modifications of Schedule 36 to FA 2004), in paragraph (2), in the substitute paragraph 31(3) of Schedule 36 to FA 2004, for paragraph (a) substitute—

“(a) the individual—

(i) becomes entitled to all the pensions payable to the individual under arrangements under the pension scheme (to which the individual did not have an actual entitlement on or before 5th April 2006) on the same date, and

(ii) does not become entitled to more than one pension commencement lump sum in connection with becoming entitled to those pensions; or”.

(9) In article 25CA (circumstance A: tax treatment of stand-alone lump sums), in paragraph (2), in the inserted section 637GA of ITEPA 2003 (stand-alone lump sums)—

(a) in subsection (3)(b), for “immediately before the individual becomes” substitute “on the individual becoming”;

(b) at the end insert—

“(4) In determining the amount of the individual’s lump sum and death benefit allowance that is available on the individual becoming entitled to the lump sum, paragraph 20H of Schedule 36 of FA 2004 (individual’s enhanced lump sum and death benefit allowance)(2) has effect as if, in sub-paragraph (2) of that paragraph, B (the aggregate of the lump sum and death benefit allowance enhancement factors operating in relation to the individual) were zero.”.

(10) In article 25CC (circumstance C: tax treatment of stand-alone lump sums), in paragraph (2), in the inserted section 637GA of ITEPA 2003 (stand-alone lump sums)—

(a) in subsection (3)(b), for “immediately before the individual becomes” substitute “on the individual becoming”;

(b) at the end insert—

“(4) In determining the amount of the individual’s lump sum and death benefit allowance that is available on the individual becoming entitled to the lump sum, paragraph 20H of Schedule 36 of FA 2004 (individual’s enhanced lump sum and death benefit allowance) has effect as if, in sub-paragraph (2) of that paragraph, B (the aggregate of the lump sum and death benefit allowance enhancement factors operating in relation to the individual) were zero.”.

(1)

S.I. 2006/572. Article 23 was amended by S.I. 2008/2990 and 2011/1782. Articles 23ZA to 23ZE and article 23D were inserted by S.I. 2011/732. Articles 25CA to 25CC were inserted by paragraph 95 of Schedule 9 to FA 2024 and were amended by S.I. 2024/356. Article 25CC modified Chapter 15A of Part 9 of ITEPA 2003 by providing for it to have effect with the insertion of section 637GA.

(2)

Paragraph 20H was inserted by paragraph 8(16) of the Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations (S.I. 2024/1012).