PART 9Commutation of periodic compensation
Circumstances in which the portion of compensation to be commuted may exceed 25 %29
1
The prescribed circumstances for the purposes of paragraph 9(2) of Schedule 5 to the Act are that—
a
the transferee must have attained the age of 60 but not have attained the age of 75 on the date specified in paragraph (4) (the nominated date); and
b
the portion to be commuted is a PPF trivial commutation lump sum.
2
A payment is a PPF trivial commutation lump sum if—
a
either—
i
no trivial commutation lump sum or PPF trivial commutation lump sum has previously been paid to the transferee by either a registered pension scheme; or the Board; or
ii
if such a lump sum has previously been paid, the PPF trivial commutation lump sum is paid before the end of the commutation period;
b
on the nominated date the value of the transferee's pension rights and entitlement to PPF compensation does not exceed the commutation limit;
c
it is paid when all or part of the transferee's standard lifetime allowance is available; and
d
it extinguishes the transferee's entitlement to PPF compensation.
3
“The commutation period” is the period beginning with the day on which a trivial commutation lump sum or PPF trivial commutation lump sum was first paid to the transferee and ending 12 months after that day.
4
The nominated date is—
a
a date nominated by the transferee which is within the period of three months ending with the day on which the transferee proposes to exercise the option to commute; or
b
if no date is nominated by the transferee, a date within that period nominated by the Board.
5
The commutation limit is 1% of the standard lifetime allowance on the nominated date.
6
For the purposes of paragraph (2)(b)—
a
the value of the transferee's pension rights is the aggregate of—
i
the value of the transferee's relevant crystallised pension rights (calculated in accordance with paragraph 8 (trivial commutation lump sum) of Schedule 29 to the Finance Act 2004 M1 (‘the Finance Act’)); and
ii
the value of the transferee's uncrystallised rights (calculated in accordance with paragraph 9 (trivial commutation lump sum) of Schedule 29 to the Finance Act); and
b
the value of the transferee's entitlement to PPF compensation is the aggregate of—
i
any entitlement to lump sum compensation under the pension compensation provisions; and
ii
any entitlement to periodic compensation under the pension compensation provisions.
7
For the purposes of paragraph (6)(b)—
a
the value of any entitlement to lump sum compensation is the full amount of lump sum compensation to which the transferee is entitled on the nominated date; and
b
the value of periodic compensation is to be calculated by multiplying the annual periodic compensation to which the transferee is entitled on the nominated date by 20.
8
In this regulation—
a
“registered pension scheme” has the same meaning as in section 150(2) of the Finance Act (meaning of “pension scheme”);
b
“standard lifetime allowance” means the amount specified in the relevant order for that tax year, made under section 218(3) of the Finance Act (individual's lifetime allowance and standard lifetime allowance);
c
“tax year” has the same meaning as section 4(2), (3) and (4) of the Income Tax Act 2007 (income tax an annual tax); and
d
“trivial commutation lump sum” has the same meaning as in paragraph 7 of Schedule 29 to the Finance Act (trivial commutation lump sum).