The Taxation of Pension Schemes (Consequential Amendments of Occupational and Personal Pension Schemes Legislation) Order 2006

Amendment of the Personal and Occupational Pension Schemes (Protected Rights) Regulations 1996

10.—(1) Amend the Personal and Occupational Pension Schemes (Protected Rights) Regulations(1) as follows.

(2) In regulation 3(f) (options under section 10(2) and (3) of the Pension Schemes Act 1993 for schemes to designate which rights are protected rights) for “having the meanings” to the end of that paragraph substitute “have the meanings given to them by section 202(3) and (4) of the Finance Act 2004 (minimum contributions under pensions legislation).”.

(3) In regulation 8 (giving effect to protected rights by provision of a lump sum), for paragraph (1) substitute—

“(1) For the purposes of section 28(4) of the 1993 Act (effect may be given to protected rights by the provision of a lump sum but subject to prescribed restrictions), the restrictions are that the payment must be authorised under section 164 of the Finance Act 2004 (authorised member payments) and either paragraph (1A) or (1B) must be satisfied, together with—

(a) paragraphs (1C) to (1E) if the lump sum payment qualifies as a pension commencement lump sum; or

(b) paragraph (1F) if the lump sum payment qualifies as a serious ill-health lump sum.

(1A) This paragraph is satisfied if the lump sum payment is permitted by the lump sum rule in section 166 of the Finance Act 2004 and qualifies as—

(a) a pension commencement lump sum for the purposes of paragraph 1 of Part 1 of Schedule 29 to that Act;

(b) a serious ill-health lump sum for the purposes of paragraph 4 of that Part;

(c) a trivial commutation lump sum for the purposes of paragraph 7 of that Part; or

(d) a winding-up lump sum for the purposes of paragraph 10 of that Part.

(1B) This paragraph is satisfied if the lump sum payment is permitted by the lump sum death benefit rule in section 168 of the Finance Act 2004 and qualifies as—

(a) a trivial commutation lump sum death benefit for the purposes of paragraph 20 of Part 2 of Schedule 29 to that Act; or

(b) a winding-up lump sum death benefit for the purposes of paragraph 21 of that Part.

(1C) This paragraph is satisfied if the rules of the scheme impose a limit on the maximum payment which may be taken by way of a pension commencement lump sum from funds available for a member’s protected rights.

(1D) The limit referred to in paragraph (1C) must not exceed—

(a) 25 per cent. of the member’s protected rights which are crystallised by the member’s benefit crystallisation event 6 and the relevant pension benefit crystallisation event connected with event 6 (“the member’s benefit crystallisation events”), or

(b) the amount which represents the proportion (expressed in percentage terms) of the value of the protected rights which is equal to the percentage that the pension commencement lump sum bears to the amount crystallised by the member’s benefit crystallisation events,

whichever is the lower.

(1E) For the purpose of this regulation, section 216 of the Finance Act 2004 sets out the events which are benefit crystallisation events and the amount which is crystallised by such an event.

(1F) Where—

(a) under the scheme, a member qualifies for a lump sum payment on the ground of serious ill-health;

(b) on the date he qualifies for the payment, the member has a spouse or civil partner; and

(c) the scheme also provides for the payment of a pension to a member’s widow, widower or surviving civil partner,

this paragraph is satisfied if the scheme retains a sum equal to at least one half of the value on that date of the funds required to provide for a member’s protected rights.”.

(4) In regulation 10 (choice of insurance company by annuitant), in paragraph (a), in both sub-paragraph (i) and sub-paragraph (ii), omit “if that age is not less than 60 years”.

(5) In regulation 12 (death of member before effect given to his protected rights), for paragraph (14), substitute—

“(14) The lump sum referred to in paragraph (3) is one which—

(a) is permitted by the lump sum death benefit rule in section 168 of the Finance Act 2004 and qualifies as a trivial commutation lump sum death benefit for the purposes of paragraph 20 of Part 2 of Schedule 29 to that Act; and

(b) is paid to the widow, widower or surviving civil partner where—

(i) effect is given to all the member’s protected rights by the payment of a lump sum; and

(ii) either—

(aa) the member, when he died, had no rights under the scheme other than his protected rights; or

(bb) effect is given to all those of his rights under the scheme which are not protected rights by the payment of a lump sum.”.

(6) For regulation 17 (tax-exemption and tax-approval) substitute—

“Tax registration

17.   For the purposes of section 33 of the 1993 Act (tax requirements to prevail over certification requirements) tax-exemption and tax-approval mean tax registration under section 153 of the Finance Act 2004.”.

(1)

S.I. 1996/1537; relevant amending instruments are S.I. 1997/786, 2002/681, 2005/704, 2050 and 3164.