The Social Security (Contributions) Regulations 2001

[F1 Payments from employer-financed retirement benefits schemes and employer-financed pension only schemes U.K.

10.— (1) This paragraph applies to payments in paragraphs 8(b) and 9(1)(b) which—

(a) if the scheme had been a registered pension scheme—

(i) would have been authorised member payments under any of the provisions of section 164 of the Finance Act 2004 (authorised member payments) listed in sub-paragraph (4); and

(ii) would satisfy any of the conditions in sub-paragraph (5); and

(b) are made after the employment of the employed earner by—

(i) the secondary contributor,

(ii) a subsidiary of the secondary contributor, or

(iii) a person connected with the secondary contributor or a subsidiary of the secondary contributor,

has ceased.

• For the purposes of this sub-paragraph—

• “subsidiary” has the meaning given in section 838 of the Taxes Act 1988; and

• an employer is connected with any of the persons with respect to whom he would be a connected person by virtue of section 839 of that Act.

(2) In the following provisions of this paragraph—

(a) “the Act” means the Finance Act 2004;

(b) a reference to a numbered section or Schedule (without more) is a reference to the section or Schedule bearing that number in the Act; and

(b) any reference to a numbered pension rule is to the pension rule contained in section 165 bearing that number.

(3) In applying any provision of the Act for the purposes of this paragraph, a reference to the scheme administrator is to be read as a reference to—

(a) the responsible person, within the meaning of section 399A of ITEPA 2003, in relation to the employer-financed retirement benefits scheme, or

(b) the person who would be the responsible person if the scheme were an employer-financed retirement benefits scheme.

(4) The provisions referred to in sub-paragraph (1)(a)(i) are—

(a) section 164(a) (pensions permitted by the pension rules (see section 165)),

(b) section 164(b) (lump sums permitted by the lump sum rule (see section 166)),

(c) section 164(e) (payments pursuant to a pension sharing order or provision), and

(d) section 164(f) (payments of a description prescribed by regulations made by the Commissioners for Revenue and Customs).

(5) The conditions referred to in sub-paragraph (1)(a)(ii) are that, if the scheme had been a registered pension scheme—

(a) any pension payable under its rules would have satisfied—

(i) pension rules 1 and 3,

(ii) pension rule 4 or pension rule 6, and

(iii) paragraph 1(1)(e) of Schedule 29;

(b) in relation to any lump sum payable under its rules, section 166(1)(a) (pension commencement lump sum) and paragraphs 1 to 3 of Schedule 29, as modified by sub-paragraph (6) below, would have been satisfied;

(c) in relation to any lump sum payable under its rules, section 166(1)(b) (serious ill-health lump sum) and paragraph 4 of Schedule 29, as modified by sub-paragraph (6) below, would have been satisfied; and

(d) any pension is payable until the member’s death in instalments at least annually.

(6) The amount to be disregarded shall be computed in accordance with Part 1 of Schedule 29 (lump sum rule) as if that Part were modified as follows—

(a) in paragraph 1 (pension commencement lump sum)—

(i) paragraphs (b) and (f) of sub-paragraph (1) were omitted,

(ii) for sub-paragraph (2) there were substituted—

“(2) But if a lump sum falling within sub-paragraph (1) exceeds the permitted lump sum, no part of it shall be disregarded.”;

(iii) sub-paragraph (4) were omitted; and

(iv) for sub-paragraph (5) there were substituted—

“(5) Paragraph 2 defines the permitted lump sum.”;

(b) for paragraph 2 there were substituted—

“2.   The permitted lump sum is the higher of—

where—

• MVF is the market value of the employee’s employer-financed retirement benefits scheme fund at the time the benefit is paid to the individual,

• LS is the amount of the lump sum, and

• MAP is the maximum annual pension which could be paid to the member under the arrangement.”;

(c) paragraph 3 were omitted;

(d) in paragraph 4, paragraphs (b) and (c) of sub-paragraph (1) and sub-paragraph (2) were omitted.

(7) No payment by way of benefits shall be disregarded by virtue of this paragraph if they are payable in respect of a period during which an earner is—

(a) engaged as a self-employed earner under a contract for services with, or

(b) re-employed as an employed earner by,

the secondary contributor from employment with whom the benefits were derived.]

Textual Amendments

F1 Sch. 3 Pt. VI paras. 8-11 added (6.4.2006) by The Social Security (Contributions) (Amendment No. 2) Regulations 2006 (S.I. 2006/576), regs. 1, 8(7)