The Registered Pension Schemes and Relieved Non-UK Pension Schemes (Lifetime Allowance Transitional Protection) (Amendment) Regulations 2013

EXPLANATORY NOTE

(This note is not part of the Regulations)

The Finance Act 2011 (c. 11) made changes to the Lifetime Allowance Charge applied to pensions by reducing the Lifetime Allowance. Paragraph 14 of Schedule 18 to that Act provided for transitional protection for the Lifetime Allowance provided that conditions contained within that paragraph are met and a person has served notice on the Commissioners for Her Majesty’s Revenue and Customs of intention to rely on the protection provided by that paragraph (a “paragraph 14 notice”).

These Regulations amend that paragraph to remove restrictions in the transitional protection for the Lifetime Allowance Charge, and modify the Registered Pension Schemes (Lifetime Allowance Transitional Protection) Regulations 2011 (S.I. 2011/1752) to enable relieved members of relieved non-UK pension schemes to serve a paragraph 14 notice.

Regulation 1 provides for the citation, commencement and effect of these Regulations. Regulations 2(2), 2(4) and 2(5) have retrospective effect from 6th April 2012. Regulation 2(3) has retrospective effect from 6th April 2013. Paragraphs 15(3) and (4) of Schedule 18 to the Finance Act 2011 provide that regulations made under paragraph 15 may include provisions having effect in relation to a time before the regulations are made provided that that time is no earlier than 6th April 2012 where those provisions do not increase a person’s liability to tax or 6th April 2013 where they do.

Regulation 2(2) inserts a new sub-paragraph (1A) into paragraph 14 of Schedule 18 to the Finance Act 2011 in order to extend the transitional protection to relieved members of relieved non-UK pension schemes who are not also members of a registered pension scheme.

Regulation 2(3) inserts new sub-paragraphs (4A) to (4E) to apply the relevant provisions in paragraph 14(4) of that Schedule to relieved non-UK pension schemes from 6th April 2013.

Regulation 2(4) substitutes new sub-paragraphs (13) to (14D). The new sub-paragraph (13) expands the definition of “relevant percentage” in order to provide that certain increases in the value of an individual’s rights are ignored for the purposes of determining if there has been a benefit accrual and calculating the value of it. The new sub-paragraph (14) inserts definitions necessary for the operation of the new sub-paragraph (13).

New sub-paragraph (14A) secures that, in relation to certain schemes, increases in value which are as a result of revaluations under relevant statutory provisions are ignored for the purposes of calculating a benefit accrual. New sub-paragraphs (14B) to (14D) secure that certain increases in value in annuity contracts are ignored for the purposes of calculating a benefit accrual. This corrects a consequence of the Finance Act 2011 whereby people would have lost fixed protection in cases where they should not have done so.

Regulation 2(5) inserts new sub-paragraph 19 to make it clear that references to a relieved non-UK pension scheme or a relieved member of such a scheme are to be read in accordance with the provisions of the Finance Act 2004 (c. 12) which applies lifetime allowance provisions to members of overseas pension schemes.

Regulation 3 amends regulation 4(2)(b) of the Registered Pension Schemes (Lifetime Allowance Transitional Protection) Regulations 2011 to provide that in the case of relieved members of relieved non-UK pension schemes the deadline for serving a paragraph 14 notice is the 5th April 2014. It also amends regulation 13(1) to remove a now redundant reference to a registered pension scheme.

A Tax Information and Impact Note covering this instrument was published on 3rd March 2011 and is available on the HMRC website at http://www.hmrc.gov.uk/thelibrary/tiins.htm. It remains an accurate summary of the impacts that apply to this instrument.