Part 3 – Uncrystallised rights at member’s death
252.Paragraph 21 inserts a new benefit crystallisation event 5C (BCE 5C) into section 216(1) of FA 2004. BCE 5C provides that any funds designated into a dependant’s or a nominee’s flexi-access drawdown fund will be tested against the member’s lifetime allowance if the member was under the age of 75 when they died and the funds are designated within the relevant two-year period. The amount that is tested against the member’s lifetime allowance will be the total of the sums and assets designated as available for drawdown. Where the member does not have sufficient lifetime allowance remaining at the time of their death, the excess will be subject to the lifetime allowance charge. This test ensures that unlimited amounts of tax-relieved pension savings cannot be passed on entirely tax-free.
253.Paragraph 22 amends section 217 of FA 2004 to provide that the person liable to any lifetime allowance charge arising as a result of new BCE 5C, will be the dependant or nominee as appropriate. That is, the charge will be the sole liability of the recipient.
254.Paragraph 23 amends section 219 of FA 2004 to provide that where there is more than one relevant post-death crystallisation event (BCE 5C and/or BCE 7) in respect of the member, the BCE are to be treated as occurring immediately before the member’s death, but after the entitlement to any pension commencement lump sum.
255.Paragraph 24(2) amends paragraph 1 of Schedule 32 to provide that where a BCE 5C or BCE 7 occurs, the relevant pension schemes are the registered pension schemes that the individual was a member of immediately before their death.
256.Paragraph 24(3) inserts new paragraphs 14B and 14C into Schedule 32. New paragraph 14B defines the relevant two-year period for the purposes of BCE 5C as the period starting on the date on which the scheme administrator first knew of the member’s death or, if earlier, the day when they could first reasonably have been expected to know of it. New paragraph 14C defines relevant unused uncrystallised funds for the purposes of BCE 5C as any unused uncrystallised funds as defined in new paragraph 27E(4) and (5) of Schedule 28 (as inserted by paragraph 3 of Schedule 2) but only where the member dies before reaching age 75.
