The Pension Sharing (Implementation and Discharge of Liability) Regulations 2000

Disqualification as a destination for pension credit—annuity contracts and insurance policies E+W+S

15.—(1) The circumstances referred to in paragraph 7(4) of Schedule 5 to the 1999 Act (circumstances in which an annuity contract or insurance policy is disqualified as a destination for a pension credit) are where the requirements specified in paragraphs (2) to (7) are not satisfied.

(2) The annuity contract or insurance policy must provide that that contract or policy, as the case may be, may not be assigned or surrendered unless—

(a) the person entitled to the pension credit; or

(b) if the person entitled to the pension credit has died, his [F1 widow, widower or surviving civil partner],

has consented to the assignment or surrender.

(3) The benefits previously secured by the annuity contract or insurance policy become secured, or are replaced by benefits which are secured by another qualifying arrangement.

(4) The annuity contract or insurance policy, as the case may be, must provide that the benefits secured by that contract or policy may be commuted if F2 ...—

(a) the conditions set out in paragraph (5) are satisfied; or

[F3 (aa) the condition set out in paragraph (5A) is satisfied; or]

(b) the conditions set out in paragraph (6) are satisfied.

(5) The conditions referred to in paragraph (4)(a) are—

(a) the benefits secured by the annuity contract or insurance policy have become payableF4 ...;

[F5 (b) any lump sum payment—

(i) is permitted by the lump sum rule in section 166 of the Finance Act 2004; and

(ii) qualifies as a trivial commutation lump sum for the purposes of paragraph 7 of Part 1 of Schedule 29 to that Act; and]

(c) all of the interest of the person entitled to the pension credit under the annuity contract or insurance policy is discharged upon payment of a lump sum.

[F6 (5A) The condition referred to in paragraph (4)(aa) is that the lump sum payment is—

(a) made by a registered pension scheme (within the meaning given in section 150(2) of the Finance Act 2004 (meaning of “pension scheme”));

(b) a payment that is described in Part 2 of the Registered Pension Schemes (Authorised Payments) Regulations 2009; and

(c) made to or in respect of a member.]

(6) The conditions referred to in paragraph (4)(b) are—

(a) the benefits secured by the annuity contract or insurance policy have become payable and the person entitled to the pension credit requests or consents to the commutation;

(b) the person entitled to the pension credit is suffering from serious ill health prior to normal benefit age; and

(c) the insurance company with which the annuity contract is entered into, or with which the insurance policy is taken out, assumes an obligation to pay the benefits secured by the annuity contract or insurance policy to—

(i) the person entitled to the pension credit;

(ii) the trustees of a trust for the benefit of the person entitled to the pension credit; or

(iii) the trustees of a trust for the benefit of the dependants of the person entitled to the pension credit.

(7) The annuity contract or insurance policy must contain, or be endorsed with, terms so as to provide for any increase in accordance with regulation 32 of the Pension Sharing (Pension Credit Benefit) Regulations 2000 M1 (increase of relevant pension) which would have been applied to the benefits which have become secured or been replaced by the annuity contract or insurance policy had the discharge of liability not taken place.

(8) In this regulation—

“serious ill health" means ill health which is such as to give rise to a life expectancy of less than one year from the date on which commutation of the benefits secured by the annuity contract or insurance policy is applied for.

Textual Amendments

F1 Words in reg. 15(2)(b) substituted (5.12.2005) by The Civil Partnership (Pensions, Social Security and Child Support) (Consequential, etc. Provisions) Order 2005 (S.I. 2005/2877), art. 1, Sch. 1 para. 4 (with art. 3)

F2 Word in reg. 15(4) omitted (1.12.2009) by virtue of Occupational and Personal Pension Schemes (Authorised Payments) Amendment Regulations 2009 (S.I. 2009/2930), regs. 1, 8(a)(i)

F3 Reg. 15(4)(aa) inserted (1.12.2009) by Occupational and Personal Pension Schemes (Authorised Payments) Amendment Regulations 2009 (S.I. 2009/2930), regs. 1, 8(a)(ii)

F4 Words in reg. 15(5)(a) omitted (6.4.2006) by virtue of Taxation of Pension Schemes (Consequential Amendments of Occupational and Personal Pension Schemes Legislation) Order 2006 (S.I. 2006/744), art. 1art. 17(4)(a)

F5 Reg. 15(5)(b) substituted (6.4.2006) by Taxation of Pension Schemes (Consequential Amendments of Occupational and Personal Pension Schemes Legislation) Order 2006 (S.I. 2006/744), art. 1art. 17(4)(b)

F6 Reg. 15(5A) inserted (1.12.2009) by Occupational and Personal Pension Schemes (Authorised Payments) Amendment Regulations 2009 (S.I. 2009/2930), regs. 1, 8(b)

Marginal Citations

M1 S.I. 2000/1054.