Taxation of Pensions Act 2014

4 (1) In Schedule 28 to FA 2004 after paragraph 22 insert— U.K.

“Dependant's flexi-access drawdown fund U.K.

22A (1) For the purposes of this Part a dependant's flexi-access drawdown fund in respect of an arrangement consists of such of the sums or assets held for the purposes of the arrangement as are newly-designated dependant funds.

(2) For the purposes of this Part sums or assets held for the purposes of an arrangement are newly-designated dependant funds if—

(a) they—

(i) have, at any time on or after 6 April 2015, been designated under the arrangement as available for the payment of dependants' drawdown pension, and

(ii) are not dependant-designated funds, or

(b) they were dependant-designated funds immediately before 6 April 2015 and section 167(2A) applied to the arrangement at that time, or

(c) they have become newly-designated dependant funds by the operation of paragraph 22B, 22C or 22D, or

(d) they arise, or (directly or indirectly) derive, from newly-designated dependant funds under paragraph (a), (b) or (c) or from sums or assets which so arise or derive.

(3) Any sums or assets that become newly-designated dependant funds under sub-paragraph (2)(b) cease to be dependant-designated funds as from the start of 6 April 2015.

Conversion of certain dependants' drawdown funds into flexi-access drawdown funds U.K.

22B (1) Sub-paragraph (2) applies if—

(a) a dependant's drawdown pension fund in respect of an arrangement came into being before 6 April 2015,

(b) section 167(2A) did not apply to the arrangement immediately before 6 April 2015, and

(c) at a time on or after 6 April 2015, a payment—

(i) of dependants' income withdrawal from the fund, or

(ii) of a dependants' short-term annuity purchased using sums or assets out of the fund,

is made that (apart from sub-paragraph (2)) would breach the cap.

(2) The sums and assets that make up the fund immediately before the payment is made become newly-designated dependant funds immediately before the payment is made (so that the payment is made out of the dependant's flexi-access drawdown fund in respect of the arrangement and therefore is not part of the total capped by pension death benefit rule 4).

(3) For the purposes of sub-paragraph (1)(c), a payment of dependants' drawdown pension in respect of an arrangement is one that would breach the cap if, when its amount is added to the amounts of any dependants' drawdown pension in respect of the arrangement—

(a) paid—

(i) before it is made, but

(ii) in the same drawdown pension year in respect of the arrangement, or

(b) paid at the time it is made,

the total is greater than the cap set by pension death benefit rule 4 for that drawdown pension year.

22C (1) Sub-paragraph (2) applies if—

(a) a dependant's drawdown pension fund in respect of an arrangement came into being before 6 April 2015,

(b) section 167(2A) did not apply to the arrangement immediately before 6 April 2015, and

(c) the dependant notifies the scheme administrator that the dependant wishes the fund to become the dependant's flexi-access drawdown fund in respect of the arrangement.

(2) At—

(a) the time the scheme administrator accepts the notification, or

(b) the start of 6 April 2015 if that is later,

the sums and assets that then make up that fund become newly-designated dependant funds, if they have not previously done so by the operation of paragraph 22B.

22D (1) Sub-paragraphs (2) and (3) apply if—

(a) there is a recognised transfer from one registered pension scheme (“the old scheme”) to another registered pension scheme (“the new scheme”) of dependant-designated funds held for the purposes of an arrangement under the old scheme, and

(b) the sums or assets transferred are, under the arrangement under the new scheme for whose purposes they are first held after the transfer, designated as available for the payment of drawdown pension.

(2) If the dependant, when or before the designation is made, notifies the scheme administrator of the new scheme that the dependant wishes the sums or assets to be newly-designated dependant funds, the sums or assets become newly-designated dependant funds and do so—

(a) when the designation is made, or

(b) if later, immediately after the transfer,

except that, if both the designation and transfer are made before 6 April 2015, the sums or assets become newly-designated dependant funds at the start of 6 April 2015.

(3) If sub-paragraph (2) does not provide for the sums or assets to become newly-designated dependant funds, the sums or assets become dependant-designated funds and do so—

(a) when the designation is made, or

(b) if later, immediately after the transfer.”

(2) Sub-paragraph (1), so far as it inserts the new paragraph 22D, has effect in relation to—

(a) cases where both the designation and transfer are made after the end of 2 months beginning with the day on which this Act is passed, and

(b) cases not within paragraph (a) where—

(i) the transfer is made before 6 April 2015 and the designation is made on or after 6 April 2015, or

(ii) the designation is made before 6 April 2015 and the transfer is made on or after 6 April 2015.