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).