SCHEDULES
C4C3SCHEDULE 29Registered pension schemes: authorised lump sums—supplementary
Sch. 29 modified by The Pensions Schemes (Application of UK Provisions to Relevant Non-UK Schemes) Regulations 2006 (S.I. 2006/207), regs. 1(1), 15 (as substituted (with effect in accordance with reg. 1(3) of the amending S.I.) by S.I. 2012/1795, regs. 1(1), 6)
C1C2Part 1Lump sum rule
Sch. 29 Pt. 1 modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 25(1)(2)(4)
Sch. 29 Pt. 1 applied (with modifications) (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 11
Pension commencement lump sum
3
1
Where the member becomes entitled to income withdrawal, the applicable amount is one third of the aggregate of—
a
the amount of the sums designated as available for the payment of F11drawdown pension on that occasion, and
b
the market value of the assets so designated,
but subject to sub-paragraph (2).
2
Any of the sums and assets so designated which represent rights attributable to a disqualifying pension credit are to be disregarded.
3
Where the member becomes entitled to a lifetime annuity, the applicable amount is one third of the annuity purchase price.
4
“The annuity purchase price” 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 F4of the lifetime annuity and any related dependants' annuity, but subject to sub-paragraph (5).
F34A
For the purposes of this Part a dependants' annuity is related to a lifetime annuity payable to a member of a registered pension scheme—
a
if they are purchased either in the form of a joint life annuity or separately in circumstances in which the day on which the one is purchased is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased, and
b
the dependant's annuity will be payable to a dependant of the member.
F55
There is to be deducted from that aggregate—
a
if the sums or assets applied in (or in connection with) the purchase of the annuity or any related dependants' annuity consist of or include sums or assets representing the whole or part of the F12member's drawdown pension fund, the aggregate of the amount 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 as represents rights which are attributable to a disqualifying pension credit.
6
Where the member becomes entitled to a scheme pension F9under a defined benefits arrangement, the applicable amount is—
but subject to sub-paragraph (8).
7
In sub-paragraph (6)—
LS is the amount of the lump sum, and
F10AC is—
a
in a case where the member becomes entitled to the pension before reaching the age of 75, the amount crystallised by reason of the member becoming entitled to the pension, disregarding paragraph 3 of Schedule 32, and
b
in a case where the member becomes entitled to the pension after reaching that age, the amount that would have been so crystallised (disregarding that paragraph) but for paragraph 2 of that Schedule.
F17A
Where the member becomes entitled to a scheme pension under a money purchase arrangement, the applicable amount is one third of the scheme pension purchase price.
7B
“The scheme pension purchase price” 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, but subject to sub-paragraph (8).
7C
For the purposes of this Part a dependants' scheme pension is related to a scheme pension payable to a member of a registered pension scheme if—
a
the day on which one is purchased or sums or assets are applied for its provision is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased or sums or assets are applied for its provision, and
b
the dependants' scheme pension will be payable to a dependant of the member.
8
There is to be deducted from the aggregate of the amount of the lump sum and the amount crystallised F6or from the scheme pension purchase price—
a
b
in any case, so much (if any) of the aggregate of the lump sum and the amount crystallised F7or of the scheme pension purchase price as represents rights which are attributable to a disqualifying pension credit.
F148A
Sub-paragraphs (1) to (8) have effect subject to the following—
a
if—
i
paragraph 1A or 1B applies to the lump sum,
ii
the lump sum is paid more than 6 months before the day on which the member becomes entitled to it,
iii
a contract for a lifetime annuity is entered into to provide the pension in connection with which the lump sum is paid, and
iv
on or after 19 March 2014 the contract is cancelled,
the applicable amount is one third of the annuity purchase price that would have been given by sub-paragraphs (4) to (5) in the case of that annuity had the contract not been cancelled, and
b
if—
i
paragraph 1A or 1B applies to the lump sum,
ii
the lump sum is paid more than 6 months before the day on which the member becomes entitled to it, and
iii
paragraph (a) does not apply,
the applicable amount is one third of the sums, plus one third of the then market value of the assets, held at the time the lump sum is paid for the purpose of providing the pension at that time expected to be the pension in connection with which the lump sum is paid.
8B
For the purposes of sub-paragraph (8A)(a)(ii), the member is treated as not having become entitled to a pension as a result of the cancelled contract having been entered into.
F29
Sub-paragraph (10) 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 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.
10
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 any amount by which—
a
the applicable amount in relation to the scheme pension under sub-paragraph (6), exceeds
b
the amount which would be that applicable amount under sub-paragraph (7A) if the arrangement were a money purchase arrangement.
11
For the purposes of sub-paragraph (9)—
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.
12
In sub-paragraphs (9) and (10) “relevant defined benefits arrangement” means—
a
the defined benefits arrangement mentioned in paragraph (a) or (b) of sub-paragraph (11), 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.
Sch. 29 modified by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), art. 23C (as inserted (1.6.2009) by S.I. 2009/1172, arts. 1, 3 (as amended (with effect in accordance with s. 42(9) of the amending Act) by Finance Act 2014 (c. 26), s. 42(5))