The Occupational Pension Schemes (Schemes that were Contracted-out) Regulations 2015

Payment of a lump sum instead of a pension

18.—(1) A relevant scheme(1) may not provide for the payment of a lump sum instead of a pension that is attributable to section 9(2B) rights, unless the payment to be made is authorised under section 164 of the Finance Act(2) (authorised member payments) and the payment is—

(a) permitted by the lump sum rule in section 166 of the Finance Act(3) and qualifies as—

(i) a pension commencement lump sum for the purposes of paragraph 1 of Schedule 29(4) to that Act;

(ii) a serious ill-health lump sum for the purposes of paragraph 4 of that Schedule(5);

(iii) an uncrystallised funds pension lump sum for the purposes of paragraph 4A of that Schedule(6);

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

(v) a winding-up lump sum for the purposes of paragraph 10 of that Schedule(8);

(b) permitted by the lump sum death benefit rule in section 168 of the Finance Act(9) and qualifies as a trivial commutation lump sum death benefit for the purposes of paragraph 20 of Schedule 29(10) to that Act; or

(c) made by a registered pension scheme (within the meaning of section 150(2) of the Finance Act), is a payment that is described in Part 2 of the Registered Pension Schemes (Authorised Payments) Regulations 2009(11) (commutation payments), and is made to or in respect of a member.

(2) Where, under the scheme—

(a) an earner qualifies for a lump sum payment on the ground of serious ill-health; and

(b) the earner’s widow, widower or surviving civil partner qualifies for a pension (“a survivor’s pension”),

the scheme is to continue to provide for a survivor’s pension notwithstanding the payment of a lump sum to the earner.

(1)

See section 37A(2) of the 1993 Act, inserted by the 2014 Act.

(2)

Section 164 was amended by paragraphs 1 and 6 of Schedule 23 to the Finance Act 2006 (c.25), paragraph 1 of Schedule 29 to the Finance Act 2008 (c.1), section 75(2)(b) of the Finance Act 2009 (c.10), paragraphs 62 and 63 of Schedule 16 to the Finance Act 2011 (c.11), and paragraph 85 of Schedule 1 to the Taxation of Pensions Act 2014 (c.30).

(3)

Section 166 was amended by S.I. 2006/572, paragraphs 2 and 5 of Schedule 5 to the Finance Act 2014 (c.26), and paragraphs 53, 54 and 55 of Schedule 1 to the Taxation of Pensions Act 2014.

(4)

Paragraph 1 is amended by paragraphs 1 and 34 of Schedule 10 to the Finance Act 2005 (c.7), S.I. 2006/572 and S.I. 2009/1172, paragraphs 1 and 11 of Schedule 20 to the Finance Act 2007 (c.11), paragraphs 23, 24, 62 and 79 of Schedule 16 to the Finance Act 2011 and section 51 of the Finance Act 2013 (c.29).

(5)

Paragraph 4 was amended by paragraphs 23 and 28 of Schedule 16 to the Finance Act 2011.

(6)

Paragraph 4A was inserted by paragraph 57 of Schedule 1 to the Taxation of Pensions Act 2014.

(7)

Paragraph 7 was amended by S.I. 2006/572, paragraphs 23 and 29 of Schedule 16 to, and paragraphs 1, 3 and 4 of Schedule 18 to, the Finance Act 2011, paragraph 71 of Schedule 1 to the Taxation of Pensions Act 2014, and section 42(1) of the Finance Act 2014.

(8)

Paragraph 10 was amended by paragraphs 1 and 12 of Schedule 20 to the Finance Act 2007, and paragraphs 23 and 30 of Schedule 16 to, and paragraphs 1, 3 and 5 of Schedule 18 to, the Finance Act 2011.

(9)

Section 168 was amended by paragraphs 1 and 5 of Schedule 19 to the Finance Act 2007, paragraphs 62 and 65 of Schedule 16 to the Finance Act 2011, and paragraphs 5 and 7 of Schedule 1 to the Taxation of Pensions Act 2014.

(10)

Paragraph 20 was amended by paragraphs 1, 3 and 6 of Schedule 18 to the Finance Act 2011, and paragraph 74 of Schedule 1 to the Taxation of Pensions Act 2014.

(11)

S.I. 2009/1171; relevant amendments are made by S.I. 2011/1751 and 2012/522.