PART 2Modifications of Part 4 of the Finance Act 2004

CHAPTER 3Benefits

Recovery of underpaid lifetime allowance charge by reduction of scheme pension27.

(1)

Paragraph (3) applies where—

(a)

an individual (“P”) has become entitled to a scheme pension,

(b)

in a subsequent tax year, as a result of a relevant rectification provision—

(i)

a lifetime allowance charge retrospectively arises in respect of the benefit crystallisation event mentioned in sub-paragraph (a), or

(ii)

the amount of a lifetime allowance charge that arose in respect of that benefit crystallisation event retrospectively increases,

(c)

the scheme administrator38 of the scheme under which the scheme pension is payable pays the new charge or (as the case may be) the increase in the charge, and

(d)

as a result of that payment, the rate of the scheme pension payable to P reduces.

(2)

Paragraph (3) also applies where—

(a)

an individual (“P”) has become entitled to a scheme pension,

(b)

the scheme administrator of the scheme under which the scheme pension is payable pays a liability arising under regulation 36 (liability for lifetime allowance charge where private sector scheme discharged from liability), and

(c)

as a result of that payment, the rate of the scheme pension payable to P reduces.

(3)

The reduction of the rate of the scheme pension does not prevent the scheme pension satisfying the condition in paragraph 2(3) of Schedule 28 to FA 2004 (requirement that rate of scheme pension does not reduce)39.