SCHEDULE 29Registered pension schemes: authorised lump sums—supplementary
Part 1Lump sum rule
Pension commencement lump sum
1
(1)
For the purposes of this Part a lump sum is a pension commencement lump sum if—
F1(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F2(aa)
the member becomes entitled to it in connection with becoming entitled to a relevant pension (or dies after becoming entitled to it but before becoming entitled to the relevant pension in connection with which it was anticipated that the member would become entitled to it),
(b)
it is paid when all or part of the member’s F3lump sum allowance is available, and all or part or the member’s lump sum and death benefit allowance is available (see paragraph 12A),
(c)
(d)
it is paid when the member has reached normal minimum pension age (or the ill-health condition is satisfied),
F7(f)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
But if a lump sum falling within sub-paragraph (1) exceeds the permitted maximum, the excess is not a pension commencement lump sum.
(3)
A pension is a relevant pension if—
(a)
it is income withdrawal, a lifetime annuity or a scheme pension, and
F10(3A)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F11(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F12(4A)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)
Paragraph 2 defines the permitted maximum.
F13(6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F141A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F151B
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F162
In paragraph 1 “the permitted maximum”, in relation to a lump sum, means the lowest of the following amounts—
(a)
the applicable amount in relation to the relevant pension (see paragraphs 2A to 2D);
(b)
so much of the member’s lump sum allowance as is available on the individual becoming entitled to the lump sum (see paragraph 12A);
(c)
so much of the member’s lump sum and death benefit allowance as is available on the individual becoming entitled to the lump sum (see paragraph 12A).
F172A
(1)
This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is income withdrawal.
(2)
The applicable amount is one third of the scheme pension capital value.
(3)
The scheme pension capital value is (subject to sub-paragraph (4)) the aggregate of—
(a)
the sums designated as available for the payment of drawdown pension on that occasion, and
(b)
the market value of the assets so designated.
(4)
There is to be deducted from the amount determined under sub-paragraph (3) so much (if any) of the sums and assets designated as mentioned in sub-paragraph (3)(a) or (b) as represent rights attributable to a disqualifying pension credit.
2B
(1)
This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is a lifetime annuity.
(2)
The applicable amount is one third of the annuity purchase price.
(3)
The annuity purchase price is (subject to sub-paragraph (4)) the aggregate of—
(a)
such of the sums held for the purposes of the pension scheme, and
(b)
the market value of such of the assets held for the purposes of the pension scheme,
as are applied in (or in connection with) the purchase of the lifetime annuity and any related dependants’ annuity and any related nominees’ annuity.
(4)
There is to be deducted from the amount determined under sub-paragraph (3)—
(a)
if the sums or assets applied in (or in connection with) the purchase of the annuity or any related dependants’ annuity or any related nominees’ annuity consist of, or include, sums or assets representing the whole or part of the member’s drawdown pension fund or of the member's flexi-access drawdown fund, the aggregate of those sums and the market value of those assets, and
(b)
in any case, so much (if any) of the sums or assets applied in (or in connection with) the purchase of the annuity or any related dependants’ annuity or any related nominees’ annuity as represents rights which are attributable to a disqualifying pension credit.
2C
(1)
This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is—
(a)
a scheme pension under a defined benefits arrangement, or
(b)
a collective money purchase arrangement.
(2)
The applicable amount is (subject to sub-paragraph (3))—
where—
A is the amount of the lump sum;
B is the relevant revaluation factor (see section 276);
C is the amount of the pension which will be payable to the member in the period of 12 months beginning with the day on which the member becomes entitled to the pension (assuming that it remains payable throughout that period at the rate at which it is payable on that day);
D is so much (if any) of A or C as represents rights which are attributable to a disqualifying pension credit.
(3)
In determining C for the purposes of subsection (2) in a case in which the pension is under a public service pension scheme, any abatement of the pension is to be left out of account.
2D
(1)
This paragraph defines “the applicable amount” in relation to a relevant pension 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.
(2)
The applicable amount is one third of the scheme pension purchase price.
(3)
The scheme pension purchase price is (subject to sub-paragraph (4)) the aggregate of—
(a)
such of the sums held for the purposes of the pension scheme, and
(b)
the market value of such of the assets held for the purposes of the pension scheme,
as are applied in (or in connection with) the purchase or provision of the scheme pension and any related dependants’ scheme pension.
(4)
There is to be deducted from the amount determined under sub-paragraph (3)—
(a)
if the scheme pension is funded (in whole or in part) by the application of sums or assets representing the whole or part of the member’s drawdown pension fund or of the member’s flexi-access drawdown fund, the aggregate of those sums and the market value of those assets, and
(b)
in any case, so much (if any) of the sums and assets referred to in sub-paragraph (3)(a) and (b) as represent rights which are attributable to a disqualifying pension credit.
F173
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F18Pension commencement lump sums: anti-avoidance
F193A
(1)
Where this paragraph applies in relation to a pension commencement lump sum paid to the member, the pension scheme is to be treated as making to the member an unauthorised payment of the appropriate amount.
(2)
Subject to F20sub-paragraphs (3) to (4A), this paragraph applies in relation to a pension commencement lump sum if—
(a)
because of the lump sum, the amount of the contributions paid by or on behalf of, or in respect of, the member to the pension scheme, or to any other registered pension scheme, is significantly greater than it otherwise would be, and
(b)
the member envisaged at the relevant time that that would be so.
(3)
This paragraph does not apply in relation to any lump sum paid to the member on any day if the amount of the lump sum, when added to any other pension commencement lump sum paid to the member within the period of 12 months ending with that day, does not exceed F21£7,500.
(4)
This paragraph does not apply if the amount by which the contributions paid as mentioned in sub-paragraph (2)(a) is greater than it otherwise would be because of the lump sum does not exceed 30% of the amount of the lump sum.
F22(4A)
This paragraph does not apply if—
(a)
the member has reached the age of 75 when the contributions are paid as mentioned in sub-paragraph (2)(a), and
(b)
the contributions are not paid by an employer of the member.
F23(5)
“The appropriate amount” is F24the amount of the lump sum.
(6)
“The relevant time” is—
(a)
if paragraph (a) of sub-paragraph (2) is satisfied before the lump sum is paid, the time when that paragraph is first satisfied, and
(b)
otherwise, the time when the lump sum is paid.
F253B
(1)
Sub-paragraph (2) applies if—
(a)
sums or assets held for the purposes of, or representing accrued rights under, a money purchase arrangement relating to the member under a registered pension scheme (“member money purchase funds”) are subject to a relevant surrender or a relevant transfer,
(b)
the sole or main purpose of the relevant surrender or relevant transfer is to increase the applicable amount for the purposes of paragraph 2 on the member becoming entitled to a scheme pension, and
(c)
the member becomes entitled to a scheme pension under a relevant defined benefits arrangement.
(2)
The pension scheme under which the relevant defined benefits arrangement is an arrangement is to be treated as making an unauthorised payment to the member of the amount by which—
(a)
the applicable amount in relation to the relevant defined benefits arrangement (as determined under paragraph 2C), exceeds
(b)
what would be the applicable amount (as determined under paragraph 2D) if the arrangement were a money purchase arrangement.
(3)
For the purposes of sub-paragraph (1)—
(a)
member money purchase funds are subject to a “relevant surrender” if they are surrendered and, in consequence of the surrender, there is a corresponding increase in the sums or assets held for the purposes of, or representing rights under, a defined benefits arrangement relating to the member under the pension scheme (or such an arrangement is established), and
(b)
member money purchase funds are subject to a “relevant transfer” if they are transferred so as to become held for the purposes of, or to represent rights under, a defined benefits arrangement relating to the member under any other registered pension scheme.
(4)
In this paragraph “relevant defined benefits arrangement” means—
(a)
the defined benefits arrangement mentioned in paragraph (a) or (b) of sub-paragraph (3), or
(b)
any other defined benefits arrangement relating to the member (under the pension scheme or any other registered pension scheme) in the case of which any of the sums or assets held for the purposes of, or representing accrued rights under, the arrangement directly or indirectly represent sums or assets previously held for the purposes of, or representing accrued rights under, the defined benefits arrangement so mentioned.
F26Pension commencement excess lump sum
3C
(1)
For the purposes of this Part a lump sum is a pension commencement excess lump sum if—
(a)
the member becomes entitled to it in connection with becoming entitled to a relevant pension (or dies after becoming entitled to it but before becoming entitled to the relevant pension in connection with which it was anticipated that the member would become entitled to it);
(b)
it is paid when none of the member’s lump sum allowance F27, or when none of the individual’s lump sum and death benefit allowance, is available (see paragraph 12A);
(c)
it is paid within the period beginning six months before, and ending one year after, the day on which the member becomes entitled to it;
(d)
it does not reduce the rate of payment of any pension to which the member has become (actually) entitled, or extinguish the member’s entitlement to payment of any such pension;
(e)
it is paid when the member has reached normal minimum pension age (or the ill-health condition is met); and
(f)
it is not an excluded lump sum (see sub-paragraph (4)).
F28(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F29(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)
A lump sum is an “excluded lump sum” if—
(a)
it would, apart from this paragraph, be permitted to be paid under the lump sum rule in section 166, F30...
F30(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)
In determining for the purposes of this paragraph—
(a)
F32(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
the member is treated as having already become entitled to any pension commencement lump sum that is paid to the member in connection with becoming entitled to the relevant pension.
Serious ill-health lump sum
4
(1)
For the purposes of this Part a lump sum is a serious ill-health lump sum if—
(a)
before it is paid the scheme administrator has received evidence from a registered medical practitioner that the member is expected to live for less than one year, F33and
F34(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F35(ca)
either—
(i)
it is paid in respect of an uncrystallised arrangement, and it extinguishes the member's entitlement to benefits under the arrangement, or
(ii)
it is paid in respect of uncrystallised rights of the member under an arrangement other than an uncrystallised arrangement, and it extinguishes the member's uncrystallised rights under the arrangement.
F36(e)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
An uncrystallised arrangement is an arrangement F37under which the member has not previously become entitled to any pension or lump sum.
F38(2A)
In subsection (1)(ca)(ii) “uncrystallised rights”, in relation to the member, means rights of the member that are uncrystallised rights as defined by section 212(1) and (2).
F39(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F40Uncrystallised funds pension lump sum
4A
(1)
For the purposes of this Part a lump sum is an uncrystallised funds pension lump sum if—
(a)
it is paid on or after 6 April 2015 in respect of a money purchase arrangement F41that is not a collective money purchase arrangement,
F42(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)
it is paid when the member has reached normal minimum pension age (or the ill-health condition is met),
(d)
it is not a pension commencement lump sum,
(e)
it is not a lump sum that, for the purposes of Part 9 of ITEPA 2003 (pension income), is treated by regulations under section 164(1)(f) and (2) as a trivial commutation lump sum paid to the member, F43and
(f)
immediately before the member becomes entitled to it, the sums or assets that are to be used to provide it—
(i)
represent rights of the member under the scheme that are uncrystallised rights as defined by section 212(1) and (2), but
(ii)
do not to any extent represent rights attributable to a disqualifying pension credit, F44...
F45(g)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F46(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F47(6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F48(7)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F49(8)
For further provision about circumstances in which a lump sum is not an uncrystallised funds pension lump sum, see the following provisions of Part 2 of Schedule 36 (transitional provision and saving: pre-commencement rights: enhancement of allowances)—
(a)
paragraph 7(8) (enhancement of allowances: primary protection);
(b)
paragraph 12(3H) (enhancement of allowances: enhanced protection);
(c)
paragraph 18(7) (enhancement of allowances: pre-commencement pension credits);
(d)
paragraph 20A(8) (pension credits from previously crystallised rights);
(e)
paragraph 20B(8) (individuals who are not always relevant UK individuals);
(f)
paragraph 20E(9) (transfers from recognised overseas pension schemes).
Short service refund lump sum
5
(1)
For the purposes of this Part a lump sum is a short service refund lump sum if—
(a)
the pension scheme is an occupational pension scheme,
(b)
the member’s pensionable service was terminated before normal pension age but the member is not entitled to short service benefit by virtue of section 71 of the Pension Schemes Act 1993 (c. 48) (basic principle as to short service benefit),
F50(c)
the member has not previously become entitled to any pension or lump sum under the pension scheme,
(d)
it extinguishes the member’s entitlement to benefits under the pension scheme F51(except to the extent that it is prohibited from being extinguished by the payment of a lump sum by reason of the operation of provision made by or under any enactment), and
(e)
it is paid when the member has not reached the age of 75.
(2)
But if a lump sum falling within sub-paragraph (1) exceeds an amount equal to the aggregate of the member’s contributions under the pension scheme, the excess is not a short service refund lump sum.
F52(2A)
In sub-paragraph (2) the reference to the member's contributions includes—
(a)
any amount paid under section 7 of the Social Security Act 1986 (incentive payments to schemes becoming contracted-out between 1986 and 1993),
(b)
any amount paid by the Commissioners for Her Majesty's Revenue and Customs under section 42A(3) of the Pension Schemes Act 1993 or section 38A(3) of the Pension Schemes (Northern Ireland) Act 1993 (rebates), and
(c)
any amount recovered by the member's employer under regulations falling within sub-paragraph (2B) in respect of minimum payments made to the scheme in relation to any period before 6 April 2012.
(2B)
Those regulations are regulations which were made under—
(a)
section 8(3) of the Pension Schemes Act 1993 (recovery of minimum payments), or
(b)
section 4(3) of the Pension Schemes (Northern Ireland) Act 1993 (corresponding provision for Northern Ireland).
(3)
“Pensionable service”, “normal pension age” and “short service benefit” have the same meaning as in the Pension Schemes Act 1993 (see section 181 (1) of that Act).
Refund of excess contributions lump sum
6
(1)
A lump sum is a refund of excess contributions lump sum if—
(a)
it is paid in respect of a tax year in which the excess contributions condition is met in respect of the member, and
(b)
it is paid before the end of the period of six years beginning with the last day of the tax year in respect of which it is paid.
(2)
But if a lump sum falling within sub-paragraph (1) exceeds the member’s available excess contributions allowance for the tax year in respect of which it is paid, the excess is not a refund of excess contributions lump sum.
(3)
The excess contributions condition is met in respect of a member and a tax year if the amount of relievable pension contributions (see section 188(2) and (3)) paid in respect of the member in the tax year exceeds the maximum amount of relief to which the member is entitled for the tax year under section 190 (annual limit for relief).
(4)
If no refund of excess contributions lump sum has been paid to the member in respect of a tax year (by any registered pension scheme), the available excess contributions allowance for that tax year is F53(subject to sub-paragraph (7))—
(5)
If one or more refund of excess contributions lump sums have been paid to the member in respect of a tax year, the available excess contributions allowance for that tax year is F54(subject to sub-paragraph (7))—
or, if the amount resulting from that calculation is negative, is nil.
(6)
In this paragraph—
RPC is the amount of the relievable pension contributions paid in respect of the member in the tax year,
MAR is the maximum amount of relief to which the member is entitled for the tax year under section 190, and
ALS is the aggregate of the refund of excess contributions lump sums previously paid to the member in respect of the tax year.
F55(7)
If any relief given in accordance with section 192(1) in relation to any contribution included in RPC is in excess of the maximum amount of relief to which the member is entitled under section 190, RPC is to be taken to be reduced by the amount of that excess.
Trivial commutation lump sum
7
(1)
For the purposes of this Part a lump sum is a trivial commutation lump sum if—
(a)
it is paid when no trivial commutation lump sum has previously been paid to the member (by any registered pension scheme) or, if such a lump sum has previously been paid, before the end of the commutation period,
F56(aa)
it is paid in respect of a defined benefits arrangement, F57or in respect of a collective money purchase arrangement, F58or in respect of a scheme pension payable by the scheme administrator to which the member has become entitled under a money purchase arrangement F59that is not a collective money purchase arrangement (an “in-payment money-purchase in-house scheme pension”), F60or in respect of any combination of such arrangements and scheme pensions,
(b)
on the nominated date, the value of the member’s pension rights does not exceed the commutation limit,
(c)
it is paid when all or part of the member’s F61lump sum allowance is available (see paragraph 12A),
(d)
(2)
The commutation period is the period beginning with the day on which a trivial commutation lump sum is first paid to the member and ending 12 months after that day.
(3)
The nominated date is the day within the period of three months ending with the first day of the commutation period nominated by the member (or, if no date is nominated, is the first day of the commutation period).
(4)
The commutation limit is F67£30,000.
F68(4A)
The Treasury may by order substitute for the amount for the time being specified in sub-paragraph (4) such larger amount as is specified in the order.
(5)
The value of the member’s pension rights on the nominated date is the aggregate of—
(a)
the value of the member’s relevant crystallised pension rights on that date (calculated in accordance with paragraph 8), and
(b)
the value of the member’s uncrystallised rights on that date (calculated in accordance with paragraph 9).
8
(1)
The value of the member’s relevant crystallised pension rights on the nominated date is F69...—
F70(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F71(b)
the amount given by the formula—
where—
“A” is the member’s lump sum allowance;
“B” is the amount of the member’s lump sum allowance that is available (see paragraph 12A) on the payment of the lump sum in question;
“C” is the amount of any serious ill health lump sum already paid to the member so far as it was not chargeable to income tax.
F72(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F72(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9
(1)
The value of the member’s uncrystallised rights on the nominated date is the aggregate value of the member’s uncrystallised rights on that date under each arrangement relating to the member under a registered pension scheme.
(2)
The value on the nominated date of the member’s uncrystallised rights under such an arrangement is to be calculated in accordance with section 212 (valuation of uncrystallised rights for purposes of section 210).
Winding-up lump sum
10
(1)
For the purposes of this Part a lump sum is a winding-up lump sum if—
(a)
the pension scheme is an occupational pension scheme,
(b)
the pension scheme is being wound-up,
(c)
F73any person by whom the member is employed at the time when the lump sum is paid, and who has made contributions under the pension scheme in respect of the member within the period of five years ending with the day on which it is paid, meets the conditions in sub-paragraph (3),
(d)
(e)
it extinguishes the member’s entitlement to benefits under the pension scheme, F76...
F76(f)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
But if a lump sum falling within sub-paragraph (1) exceeds F77£18,000, the excess is not a winding-up lump sum.
F78(2A)
The Treasury may by order substitute for the amount for the time being specified in sub-paragraph (2) such larger amount as is specified in the order.
(3)
The conditions F79referred to in paragraph (c) of sub-paragraph (1) are that the person mentioned in that paragraph—
F80(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
is not making contributions under any other registered pension scheme in respect of the member, and
(c)
undertakes to the Inland Revenue not to make such contributions during the period of one year beginning with the day on which the lump sum is paid.
F81...
F8111
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interpretation F83...
12
(1)
Expressions used in this Part of this Schedule and in Schedule 28 have the same meaning in this Part of this Schedule as in Schedule 28.
F84(1A)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F84(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F84(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F84(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)
Where by virtue of paragraph 1(2), F853C(2), 5(2), 6(2) or 10(2) an excess is not an authorised lump sum of one description, that does not prevent the excess being an authorised lump sum of another description.
(6)
“Authorised lump sum” means a lump sum authorised to be paid by the lump sum rule.
F8612A
(1)
In this Part of this Schedule, a reference to the amount of an individual’s lump sum allowance that is available on the individual becoming entitled to a lump sum, or being paid a lump sum, is to the amount of that allowance that would be so available on the following assumption.
(2)
The assumption is that the individual becoming entitled to or (as the case may be) being paid the lump sum was a relevant benefit crystallisation event within the meaning of section 637Q of ITEPA 2003 (availability of individual’s lump sum allowance).
(3)
In this Part of this Schedule, a reference to the amount of an individual’s lump sum and death benefit allowance that is available on the individual becoming entitled to a lump sum, or being paid a lump sum, is to the amount of that allowance that would be so available on the following assumption.
(4)
The assumption is that the individual becoming entitled to or (as the case may be) being paid the lump sum was a relevant benefit crystallisation event within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance).
Part 2Lump sum death benefit rule
Defined benefits arrangements
Defined benefits lump sum death benefit
13
F87(1)
For the purposes of this Part a lump sum death benefit is a defined benefits lump sum death benefit if—
F88(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
it is paid in respect of a defined benefits arrangement,
F89(c)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and
(d)
F92...
F93(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pension protection lump sum death benefit
14
(1)
For the purposes of this Part a lump sum death benefit is a pension protection lump sum death benefit if—
F94(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
it is paid in respect of a defined benefits arrangement,
(c)
it is paid in respect of a scheme pension to which the member was entitled at the date of the member’s death, and
(d)
the member has specified that it is to be treated as a pension protection lump sum death benefit (instead of a defined benefits lump sum death benefit).
(2)
But if the amount of a lump sum falling within sub-paragraph (1) exceeds the pension protection limit, the excess is not a pension protection lump sum death benefit.
(3)
The pension protection limit is—
where—
F95AC is—
- (a)
in a case where the member became entitled to the pension before reaching the age of 75, the amount crystallised by reason of the member becoming entitled to the pension, and
- (b)
in a case where the member became entitled to the pension after having reached that age, the amount that would have been so crystallised but for paragraph 2 of Schedule 32,
AP is the amount of the pension paid in respect of the period between the member becoming entitled to the pension and the member’s death, and
TPLS is the total amount of pension protection lump sum death benefit previously paid in respect of the pension under this paragraph.
Money purchase arrangements
Uncrystallised funds lump sum death benefit
15
(1)
For the purposes of this Part a lump sum death benefit is an uncrystallised funds lump sum death benefit if—
F96(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
it is paid in respect of a money purchase arrangement,
F97(c)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d)
it is paid in respect of relevant uncrystallised fundsF98, and
(e)
it is not a charity lump sum death benefit.
F99. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F100(1A)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2)
“Relevant uncrystallised funds” means such of the sums and assets held for the purposes of the arrangement at the member’s death as—
(a)
had not been applied for purchasing a scheme pension, a lifetime annuity, F101a nominees' annuity, a dependants' scheme pension or a dependants' annuity, and
(b)
had not been designated under the arrangement as available for the payment of F102drawdown pension.
F103(2A)
Where—
(a)
the arrangement is a cash balance arrangement,
(b)
under the arrangement, a dependant of the member is entitled to be paid after the member's death an amount by way of a lump sum,
(c)
the dependant's entitlement to a lump sum of that amount under the arrangement comes into being at a time no later than the member's death,
(d)
such of the sums and assets held for the purposes of the arrangement immediately after the member's death as are held for the purpose of meeting the liability to pay the lump sum are insufficient for that purpose (including where that is because none are held for that purpose), and
(e)
a person who was an employer in relation to the member pays a contribution to the scheme—
(i)
for or towards making good that insufficiency, and
(ii)
of no more than is needed for making good the insufficiency,
the sums and assets held for the purposes of the arrangement that represent the contribution are to be treated as “relevant uncrystallised funds” for the purposes of this paragraph.
(3)
But if an amount falling within sub-paragraph (1) exceeds the permitted maximum, the excess is not an uncrystallised funds lump sum death benefit.
(4)
The permitted maximum is the aggregate of—
(a)
the amount of the sums, and
(b)
the market value of the assets,
which constitute the relevant uncrystallised funds immediately before the payment is made.
Annuity protection lump sum death benefit
16
(1)
For the purposes of this Part a lump sum death benefit is an annuity protection lump sum death benefit if—
F104(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
it is paid in respect of a money purchase arrangement, and
(c)
it is paid in respect of a scheme pension or lifetime annuity to which the member was entitled at the date of the member’s death.
(2)
But if the amount of a lump sum falling within sub-paragraph (1) exceeds the annuity protection limit, the excess is not an annuity protection lump sum death benefit.
(3)
The annuity protection limit is—
where—
F105AC is—
- (a)
in a case where the member became entitled to the pension or annuity before reaching the age of 75, the amount crystallised by reason of the member becoming entitled to the pension or annuity, disregarding paragraphs 3 and 4 of Schedule 32, and
- (b)
in a case where the member became entitled to the pension or annuity after having reached that age, the amount that would have been so crystallised (disregarding those paragraphs) but for paragraph 2 of that Schedule,
AP is the amount of the pension paid in respect of the period between the member becoming entitled to the pension or annuity and the member’s death, and
TPLS is the total amount of annuity protection lump sum death benefit previously paid in respect of the pension or annuity under this paragraph.
F106Drawdown pension fund lump sum death benefit
17
F107(1)
For the purposes of this Part a lump sum death benefit is a drawdown pension fund lump sum death benefit if—
(a)
it is paid in respect of income withdrawal to which the member was entitled F108to be paid from the member's drawdown pension fund in respect of an arrangement at the date of the member's death, and
(b)
it is not a charity lump sum death benefit.
(2)
A lump sum death benefit is also F109a drawdown pension fund lump sum death benefit if—
(a)
it is paid on the death of a dependant of the member,
F110(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)
(d)
it is not a charity lump sum death benefit.
(3)
But if the amount of a lump sum falling within sub-paragraph (1) or (2) exceeds the permitted maximum, the excess is not F113a drawdown pension fund lump sum death benefit.
(4)
The permitted maximum is the aggregate of—
(a)
the amount of the sums, and
(b)
the market value of the assets,
representing the member’s or dependant’s F114drawdown pension fund in respect of the arrangement immediately before the payment is made.
F115Flexi-access drawdown fund lump sum death benefit
17A
(1)
For the purposes of this Part a lump sum death benefit is a flexi-access drawdown fund lump sum death benefit if—
(a)
it is paid in respect of income withdrawal to which the member was entitled to be paid from the member's flexi-access drawdown fund in respect of an arrangement at the date of the member's death, and
(b)
it is not a charity lump sum death benefit.
(2)
A lump sum death benefit is also a flexi-access drawdown fund lump sum death benefit if—
(a)
it is paid on the death of a dependant of the member,
(b)
it is paid in respect of dependants' income withdrawal to which the dependant was at the date of the dependant's death entitled to be paid from the dependant's flexi-access drawdown fund in respect of an arrangement relating to the member, and
(c)
it is not a charity lump sum death benefit.
(3)
A lump sum death benefit is also a flexi-access drawdown fund lump sum death benefit if—
(a)
it is paid on the death of a nominee of the member,
(b)
it is paid in respect of nominees' income withdrawal to which the nominee was at the date of the nominee's death entitled to be paid from the nominee's flexi-access drawdown fund in respect of an arrangement relating to the member, and
(c)
it is not a charity lump sum death benefit.
(4)
A lump sum death benefit is also a flexi-access drawdown fund lump sum death benefit if—
(a)
it is paid on the death of a successor of the member,
(b)
it is paid in respect of successors' income withdrawal to which the successor was at the date of the successor's death entitled to be paid from the successor's flexi-access drawdown fund in respect of an arrangement relating to the member, and
(c)
it is not a charity lump sum death benefit.
(5)
But if the amount of a lump sum falling within sub-paragraph (1), (2), (3) or (4) exceeds the permitted maximum, the excess is not a flexi-access drawdown fund lump sum death benefit.
(6)
The permitted maximum is the aggregate of—
(a)
the amount of the sums, and
(b)
the market value of the assets,
representing the member's, dependant's, nominee's or successor's flexi-access drawdown fund in respect of the arrangement immediately before the payment is made.
Charity lump sum death benefit
18
(1)
A lump sum death benefit is a charity lump sum death benefit if—
F116(a)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b)
there are no dependants of the member,
(c)
(d)
it is paid to a charity nominated by the member F119...
F120(1A)
A lump sum death benefit is also a charity lump sum death benefit if—
(a)
the member had reached the age of 75 at the date of the member's death,
(b)
there are no dependants of the member,
(c)
it is paid in respect of relevant uncrystallised funds in respect of a money purchase arrangement at the date of the member's death, and
(d)
it is paid to a charity nominated by the member.
(1B)
“Relevant uncrystallised funds” has the meaning given by paragraph 15(2).
(2)
A lump sum death benefit is also a charity lump sum death benefit if—
(a)
it is paid on the death of a dependant of the member,
F121(b)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c)
there are no other dependants of the member,
(d)
F126(2A)
A lump sum death benefit is also a charity lump sum death benefit if—
(a)
it is paid on the death of an individual who is—
(i)
a nominee of the member, or
(ii)
a successor of the member,
(b)
there are no dependants of the member,
(c)
it is paid in respect of the individual's nominee's flexi-access drawdown fund or successor's flexi-access drawdown fund at the date of the individual's death in respect of an arrangement relating to the individual in the capacity of a nominee or successor of the member, and
(d)
it is paid to a charity nominated by the member or, if the member made no nomination, by the individual.
(3)
But if the amount of a lump sum falling within sub-paragraph (1)F127, (2) or (2A) exceeds the permitted maximum, the amount of the excess is not a charity lump sum death benefit.
(4)
The permitted maximum is the aggregate of—
(a)
the amount of the sums, and
(b)
the market value of the assets,
Transfer lump sum death benefit
F13119
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Defined benefits and money purchase arrangements
Trivial commutation lump sum death benefit
20
(1)
A lump sum death benefit is a trivial commutation lump sum death benefit F132if condition A or B is met.
F133(1A)
Condition A is that the lump sum—
(a)
is paid to a dependant entitled under the pension scheme to pension death benefit in respect of the member, and
(b)
extinguishes the dependant's entitlement under the pension scheme to pension death benefit and lump sum death benefit in respect of the member.
(1B)
Condition B is that—
(a)
the lump sum is paid after the member's death to an individual entitled to be paid a pension under the scheme—
(i)
which the member was entitled to be paid immediately before the member's death, and
(ii)
which is payable to the individual under pension rule 2 (see section 165),
(b)
if the pension is an annuity or scheme pension payable by an insurance company, the lump sum extinguishes all entitlements in respect of the member under the contract concerned, and
(c)
if the pension is a scheme pension payable by the scheme administrator, the lump sum extinguishes all entitlements to receive a scheme pension in respect of the member from the scheme administrator under pension rule 2.
(2)
But if the amount of a lump sum falling within sub-paragraph (1) exceeds F134£30,000, the excess is not a trivial commutation lump sum death benefit.
F135(3)
The Treasury may by order substitute for the amount for the time being specified in sub-paragraph (2) such larger amount as is specified in the order.
F13621
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interpretation
Interpretation of Part 2
22
(1)
Expressions used in this Part of this Schedule and in Schedule 28 have the same meaning in this Part of this Schedule as in Schedule 28.
(2)
Where by virtue of paragraph 14(2), 20(2) or 21(2) an excess is not an authorised lump sum death benefit of one description, that does not prevent the excess being an authorised lump sum death benefit of another description.
(3)
“Authorised lump sum death benefit” means a lump sum death benefit authorised to be paid by the lump sum death benefit rule.