Finance Act 2004

Dependants' short-term annuity U.K.

20 (1) [F1 For the purposes of this Part an] annuity payable to a dependant is a dependants' short-term annuity if— U.K.

(a) it is purchased by the application of sums or assets representing the whole or any part of the [F2 dependant's drawdown pension fund] in respect of an arrangement,

(b) it is payable by an insurance company,

(c) the dependant had an opportunity to select the insurance company,

[F3 (ca) the dependant becomes entitled to it before 6 April 2015,]

(d) it is payable for a term which does not exceed five years and ends before the dependant F4 ... dies, and

[F5 (e) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.]

[F6 (1ZA) For the purposes of this Part, but subject to any provision made under sub-paragraph (1C)(za), an annuity payable to a dependant is also a dependants' short-term annuity if—

(a) it is purchased by the application of sums or assets representing the whole or any part of the dependant's drawdown pension fund, or of the dependant's flexi-access drawdown fund, in respect of an arrangement,

(b) it is payable by an insurance company,

(c) the dependant becomes entitled to it on or after 6 April 2015, and

(d) it is payable for a term which does not exceed five years and ends before the dependant dies.]

[F7 (1A) An annuity does not fail to satisfy sub-paragraph (1)(e) by reason of the operation of a pension sharing order or provision.

(1B) The Board of Inland Revenue may by regulations make provision in relation to cases in which a dependants' short-term annuity payable to a person (“the original dependants' short-term annuity”) ceases to be payable and in consequence of that—

(a) sums or assets (or both) are transferred from the insurance company to another insurance company and are applied towards the provision of either another dependants' short-term annuity (a “new dependants' short-term annuity”) or a scheme pension, lifetime annuity, short-term annuity, dependants' scheme pension or dependants' annuity by the other insurance company, or

(b) sums or assets are transferred to the relevant registered pension scheme.

(1C) The regulations may provide that—

[F8 (za) in a case where—

(i) a new annuity becomes payable,

(ii) the dependant becomes entitled to it on or after 6 April 2015,

(iii) it would be a dependants' short-term annuity if any provision made under this paragraph were ignored,

(iv) the terms of the contract for it are such that there will or could be decreases in its amount other than allowed decreases (see sub-paragraph (1E)), and

(v) any other conditions prescribed by the regulations are met,

the new annuity is not a dependants' short-term annuity for the purposes of this Part,]

(a) in a case where a new dependants' short-term annuity becomes payable, the new dependants' short-term annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original dependants' short-term annuity, and

(b) in [F9 a case other than one where a new dependants' short-term annuity becomes payable], the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred.

(1D) For the purposes of sub-paragraphs (1B) and (1C) a registered pension scheme is the relevant registered pension scheme if the original dependants' short-term annuity was acquired using sums or assets held for the purposes of the pension scheme.]

[F10 (1E) In sub-paragraph (1C)(za)(iv) “allowed decreases” means decreases from time to time allowed by regulations under sub-paragraph (1)(e); and any such regulations are to be treated as having effect for this purpose.]

F11 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F1 Words in Sch. 28 para. 20(1) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(2), 64(1)

F2 Words in Sch. 28 para. 20(1)(a) substituted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 14(a)

F3 Sch. 28 para. 20(1)(ca) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 50

F4 Words in Sch. 28 para. 20(1)(d) omitted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 14(b)

F5 Sch. 28 para. 20(1)(e) substituted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(3), 64(1)

F6 Sch. 28 para. 20(1ZA) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 40

F7 Sch. 28 para. 20(1A)-(1D) inserted (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(4), 64(1)

F8 Sch. 28 para. 20(1C)(za) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 51(1)(a)

F9 Words in Sch. 28 para. 20(1C)(b) substituted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 51(1)(b)

F10 Sch. 28 para. 20(1E) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 51(2)

F11 Sch. 28 para. 20(2) repealed (6.4.2006) by Finance Act 2005 (c. 7), Sch. 10 paras. 16(5), 64(1), Sch. 11 Pt. 4

Modifications etc. (not altering text)

C1 Sch. 28 para. 20 modified (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 95