Finance Act 2004

2 (1) If sub-paragraph (2) applies, the permitted maximum is nil. U.K.

(2) This sub-paragraph applies if all the member’s rights under the arrangement under which the member becomes entitled to the relevant pension are attributable to a disqualifying pension credit.

(3) A pension credit is disqualifying if, when the member becomes entitled to it, the person subject to the corresponding pension debit has an actual (rather than a prospective) right to payment of a pension under the relevant arrangement.

(4) The relevant arrangement is the arrangement to which the pension sharing order or provision, by virtue of which the member becomes entitled to the pension credit, relates.

(5) If sub-paragraph (2) does not apply, the permitted maximum is the lower of—

(a) the available portion of the member’s lump sum allowance, and

(b) the applicable amount, calculated in accordance with paragraph 3.

[F1 (5A) But if the member dies before becoming entitled to the relevant pension in connection with which it was anticipated that the member would become entitled to the lump sum, the permitted maximum is the available portion of the member's lump sum allowance.]

(6) The available portion of the member’s lump sum allowance is—

where—

CSLA is the current standard lifetime allowance, and

AAC is the aggregate of the [F2 relevant amount in the case of] each benefit crystallisation event which has occurred in relation to the member before the member becomes entitled to the lump sum, as adjusted under sub-paragraph (7) (and if no such benefit crystallisation event has occurred, is nil).

[F3 (6A) Subject to sub-paragraph (6B), the relevant amount in the case of a benefit crystallisation event is the amount crystallised by it.

(6B) If the benefit crystallisation event is becoming entitled to a scheme pension under a money purchase arrangement [F4 that is not a collective money purchase arrangement], the relevant amount in the case of the benefit crystallisation event is the aggregate of—

(a) the amount of 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.]

(7) The adjustment of [F5 the relevant amount in the case of] a previous benefit crystallisation event referred to in the definition of AAC is the multiplication of the amount by—

where—

CSLA is the current standard lifetime allowance, and

PSLA is the standard lifetime allowance at the time of the previous benefit crystallisation event.

[F6 (7A) For the purposes of determining the available portion of the member's lump sum allowance—

(a) the fact that benefit crystallisation event 5 or benefit crystallisation event 5B has occurred in relation to the member is to be disregarded, and

(b) anything which, but for paragraph 2 or 15A of Schedule 32, would have been a benefit crystallisation event is to be treated as if it were such an event.]

(8) If the amount given by sub-paragraph (6) is negative, no portion of the member’s lump sum allowance is available.

[F7 (9) Sub-paragraph (10) applies if the member is a protected individual (but not if this paragraph applies with the modifications set out in paragraph 27 or 28 of Schedule 36).

(10) Sub-paragraphs (6) and (7) have effect[F8 —

(a) where the member becomes entitled to the lump sum on or after 6 April 2014, as if PSLA in the case of any previous benefit crystallisation event which occurs on or after 6 April 2014 were £1,500,000 if that is greater than PSLA in that case, and

(b)] as if CSLA were £1,500,000 if that is greater than CSLA.

(11) The member is a “protected individual” if—

(a) paragraph 7 of Schedule 36 (primary protection) makes provision for a lifetime allowance enhancement factor in relation to the member, or

(b) at the time the member becomes entitled to the lump sum, paragraph 12 of that Schedule (enhanced protection) applies in relation to the member.]

Textual Amendments

F1 Sch. 29 para. 2(5A) inserted (retrospectively) by Finance Act 2007 (c. 11), Sch. 20 paras. 11(4), 24(3)

F2 Words in Sch. 29 para. 2(6) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 23(2)

F3 Sch. 29 para. 2(6A)(6B) inserted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 23(3)

F4 Words in Sch. 29 para. 2(6B) inserted (1.8.2022) by Finance Act 2021 (c. 26), Sch. 5 paras. 21(3), 25(1); S.I. 2022/874, reg. 2

F5 Words in Sch. 29 para. 2(7) substituted (retrospective to 6.4.2006) by Finance Act 2006 (c. 25), s. 161(2), Sch. 23 para. 23(4)

F6 Sch. 29 para. 2(7A) inserted (with effect in accordance with Sch. 16 paras. 85, 101 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 25

F7 Sch. 29 para. 2(9)-(11) inserted (with effect in accordance with Sch. 22 para. 8(3) of the amending Act) by Finance Act 2013 (c. 29), Sch. 22 para. 8(2)

F8 Words in Sch. 29 para. 2(10) inserted (with effect in accordance with Sch. 4 para. 28(3) of the amending Act) by Finance Act 2016 (c. 24), Sch. 4 para. 28(1)

Modifications etc. (not altering text)

C5 Sch. 29 para. 2 modified (1.5.2010) by The Financial Assistance Scheme (Tax) Regulations 2010 (S.I. 2010/1187), regs. 1(1), 19(a)

C6 Sch. 29 para. 2(6) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 19