Legislation – The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 2) Regulations 2024

“637T.Section 637S: multiple lump sum death benefits paid

(1)

This section applies where two or more relevant benefit crystallisation events within section 637S(2)(a)(ii) occur in relation to an individual.

(2)

The relevant benefit crystallisation events are to be treated for the purposes of section 637S as occurring simultaneously—

(a)

immediately before the individual’s death, and

(b)

immediately after any pension commencement lump sum to which the individual becomes entitled immediately before death by virtue of section 166(2) of FA 2004 (lump sum rule).

(3)

In the application of section 637S for the purpose of determining how much of the individual’s lump sum and death benefit allowance is available on the occurrence of any of the relevant benefit crystallisation events mentioned in subsection (1)—

(a)

the reference in subsection (3) of that section to the whole of the individual’s lump sum and death benefit allowance is to the relevant proportion of that allowance, and

(b)

the reference in subsection (4) of that section to so much of the individual’s lump sum and death benefit allowance as is left after deducting the previously-used amount is to the relevant proportion of so much of that allowance as is left after deducting that amount.

(4)

In subsection (3), “the relevant proportion” means—

$\frac{A}{B}$

where—

• A is the amount of the lump sum death benefit the payment of which constitutes the relevant benefit crystallisation event in question;

• B is the aggregate of the amounts of each lump sum death benefit the payment of which constitutes a relevant benefit crystallisation event mentioned in subsection (1).”.

“(3D)

“PAYE pension income” for a tax year does not include any amount to which section 579A applies by virtue of any of the following provisions—

• section 637H(2) (certain defined benefits lump sum death benefits),

• section 637I(2) (certain pension protection lump sum death benefits),

• section 637J(2) (certain uncrystallised funds lump sum death benefits),

• section 637K(2) (certain annuity protection lump sum death benefits),

• section 637L(2) (certain drawdown pension fund lump sum death benefits),

• section 637M(2) (certain flexi-access drawdown lump sum death benefits).”.

“AC is—

(a)

where the lump sum is paid in respect of a scheme pension, the scheme pension purchase price, as determined under paragraph 2D(3) and (4);

(b)

where the lump sum is paid in respect of a lifetime annuity, the annuity purchase price, as determined under paragraph 2B(3) and (4);”.

“12A.

(1)

The following provisions of this paragraph specify the modifications of this Part of this Act, and of Chapter 15A of Part 9 of ITEPA 2003, that apply in accordance with paragraph 12(3A) (modifications applying in relation to individual with enhanced protection).

(2)

Schedule 29 (authorised lump sums) has effect as if—

(a)

in paragraph 2 (pension commencement lump sums: definition of “permitted maximum”)—

(i)

the existing text became sub-paragraph (1);

(ii)

in that sub-paragraph, paragraph (c) were omitted;

(iii)

after that sub-paragraph there were inserted—

“(2)

In the case of an individual who has previously become entitled to a serious ill-health lump sum under the arrangement under which the entitlement to the lump sum arises—

(a)

sub-paragraph (1) does not apply, and

(b)

in paragraph 1 “the permitted maximum”, in relation to a lump sum, is nil.””;

(b)

in paragraph 4A (uncrystallised funds pension lump sum), after sub-paragraph (1) there were inserted—

“(1A)

But a lump sum is not an uncrystallised funds pension lump sum if the lump sum condition (see paragraphs 24(2) and (3), 25 and 26 of Schedule 36) is met in relation to the member.”

(3)

Chapter 15A of Part 9 of ITEPA 2003 has effect as if—

(a)

in section 637C (serious ill-health lump sums), in subsection (3), for the words from “so much of” to the end there were substituted “the maximum amount of a serious ill-health lump sum that could have been paid to the member on 5th April 2024 under the arrangement under which the entitlement to the lump sum arises”;

(b)

in section 637D (uncrystallised funds pension lump sums)—

(i)

in subsection (3), for paragraph (b) there were substituted—

“(b)

the maximum amount of an uncrystallised funds pension lump sum that could have been paid to the member with no liability to income tax on 5th April 2024 under the arrangement under which the entitlement to the lump sum arises.”;

(ii)

after that subsection there were inserted—

“(4)

In the case of an individual who has previously become entitled to a serious ill-health lump sum under the arrangement under which the entitlement to the lump sum arises—

(a)

subsection (3) does not apply, and

(b)

in subsection (2) “the permitted maximum”, in relation to an uncrystallised funds pension lump sum paid to a member, is nil.””;

(c)

in section 637H (defined benefits lump sum death benefits), in subsection (7), for the definition of “the permitted maximum” there were substituted—

““the permitted maximum”, in relation to a defined benefits lump sum death benefit paid in respect of a member, means—

(a)

the maximum amount of a defined benefits lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

(b)

the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

or, if that produces a negative result, nil.”;

(d)

in section 637I (pension protection lump sum death benefits), in subsection (5), for the definition of “the permitted maximum” there were substituted—

““the permitted maximum”, in relation to a pension protection lump sum death benefit paid in respect of a member, means—

(a)

the maximum amount of a pension protection lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

(b)

the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

or, if that produces a negative result, nil.”;

(e)

in section 637J (uncrystallised funds lump sum death benefits), in subsection (7), for the definition of “the permitted maximum” there were substituted—

““the permitted maximum”, in relation to an uncrystallised funds lump sum death benefit paid in respect of a member, means—

(a)

the maximum amount of an uncrystallised funds lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

(b)

the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

or, if that produces a negative result, nil.”;

(f)

in section 637K (annuity protection lump sum death benefits), in subsection (5), for the definition of “the permitted maximum” there were substituted—

““the permitted maximum”, in relation to an annuity protection lump sum death benefit paid in respect of a member, means—

(a)

the maximum amount of an annuity protection lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

(b)

the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

or, if that produces a negative result, nil.”;

(g)

in section 637L (drawdown pension fund lump sum death benefits), in subsection (8), for the definition of “the permitted maximum” there were substituted—

““the permitted maximum”, in relation to a drawdown pension fund lump sum death benefit paid in respect of a member, means—

(a)

the maximum amount of a drawdown pension fund lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

(b)

the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

or, if that produces a negative result, nil.”;

(h)

in section 637M (flexi-access drawdown lump sum death benefits), in subsection (8), for the definition of “the permitted maximum” there were substituted—

““the permitted maximum”, in relation to a flexi-access drawdown lump sum death benefit paid in respect of a member, means—

(a)

the maximum amount of a flexi-access drawdown lump sum death benefit that could have been paid in respect of the member on 5th April 2024 under the arrangement under which the lump sum is paid, less

(b)

the aggregate of each non-taxable amount (if any) in relation to each relevant lump sum death benefit (if any) previously paid in respect of the member in the post-5th April 2024 period under that arrangement,

or, if that produces a negative result, nil.”;

(i)

in section 637P (individual’s lump sum allowance), for “£268,275” there were substituted “£375,000”;

(j)

in section 637R (individual’s lump sum and death benefit allowance)—

(i)

the existing text became subsection (1);

(ii)

in that subsection, for “£1,073,100” there were substituted “an amount equal to the value of the individual’s uncrystallised rights on 5 April 2024”;

(iii)

after that subsection there were inserted—

“(2)

In this section “uncrystallised rights” has the same meaning as in section 212 of FA 2004; and the value for the purposes of this section of any uncrystallised rights is to be calculated in accordance with that section.”;

(k)

after section 637T (section 637S: multiple lump sum death benefits paid) there were inserted—

“637U.Interpretation of Chapter

(1)

A reference in this Chapter to the maximum amount of a lump sum that “could have been paid” on 5th April 2024, in the case of—

(a)

a serious ill-health lump sum paid under a defined benefits arrangement, or

(b)

a lump sum death benefit of any description paid under such an arrangement,

is a reference to an amount equal to the appropriate limit in relation to becoming entitled to a lump sum of that description on that date, determined under paragraph 15(4) of Schedule 36 to FA 2004.

(2)

For the purposes of this Chapter, the maximum amount of a lump sum of any description that “could have been paid” on 5th April 2024 is to be determined on the assumption that any condition required to be met before such a payment could be made was met.

(3)

In the definitions of “the permitted maximum” in sections 637H, 637I, 637J, 637K, 637L and 637M, and in this section—

(a)

“relevant lump sum death benefit” has the meaning given by section 637S(2)(c);

(b)

“non-taxable amount”, in relation to the payment of a relevant lump sum death benefit, has the meaning given by section 637S(6);

(c)

“the post-5th April 2024 period”, in relation to a lump sum, means the period beginning with 6 April 2024 and ending with the date on which the lump sum is paid.

(4)

Subsections (5) and (6) apply where—

(a)

it is necessary to determine for the purposes of any provision of this Chapter “the permitted maximum” in relation to a lump sum of any description paid after 5th April 2024 under an arrangement (“the paying arrangement”) under a registered pension scheme, and

(b)

as a result of one or more recognised transfers made in the post-5th April 2024 period, any of the sums and assets applied for the provision of the lump sum were, at any time before the payment of the lump sum, held for the purposes of another arrangement (“a predecessor arrangement”) under a different registered pension scheme.

(5)

A reference to the maximum amount of a lump sum of any description that could have been paid on 5th April 2024 under the paying arrangement, so far as the lump sum paid is referable to sums and assets that were held on that date for the purposes of a predecessor arrangement, is a reference to the maximum amount of a lump sum of that description that could have been paid on that date under that predecessor arrangement, had those sums and assets (and only those sums and assets) been applied for the provision of the lump sum.

(6)

A reference to a relevant benefit crystallisation event occurring under the paying arrangement before the date on which the lump sum is paid includes a reference to a relevant benefit crystallisation event occurring under a predecessor arrangement, so far as the relevant benefit crystallisation event is referable to sums and assets applied for the provision of the lump sum.

(7)

In this section a reference to a lump sum includes a lump sum death benefit.”.

“Individual’s enhanced lump sum and death benefit allowance

20H.

(1)

This paragraph applies for determining the amount of the “enhanced lump sum and death benefit allowance” of an individual in relation to whom one or more lump sum and death benefit allowance enhancement factors operate.

(2)

The individual’s “enhanced lump sum and death benefit allowance” is—

$A + \left(A \times B\right)$

where—

• A is—

  1. (a)

     in the case of an individual in relation to whom a relevant protection provision applies, the individual’s protected lump sum and death benefit allowance (as defined in that provision);

  2. (b)

     B is the aggregate of the lump sum and death benefit allowance enhancement factors that operate in relation to the individual.

(3)

The following provisions are “relevant protection provisions”—

(a)

paragraph 7 of this Schedule (primary protection)9;

(b)

paragraph 14 of Schedule 18 to FA 2011 (fixed protection)10;

(c)

paragraph 1 of Schedule 22 to FA 2013 (“fixed protection 2014”)11;

(d)

paragraph 1 of Schedule 6 to FA 2014 (“individual protection 2014”)12;

(e)

paragraph 1 of Schedule 4 to FA 2016 (“fixed protection 2016”)13;

(f)

paragraph 9 of that Schedule (“individual protection 2016”).

(4)

The following paragraphs of this Schedule make provision for the operation of a lump sum and death benefit allowance enhancement factor in relation to an individual—

(a)

paragraph 7 (primary protection),

(b)

paragraph 18 (pre-commencement pension credits),

(c)

paragraph 20A (pension credits from previously crystallised rights),

(d)

paragraph 20B (non-residence: general), and

(e)

paragraph 20E (transfers from recognised overseas pension scheme: general).”.

“27.

(1)

If (and for so long as) paragraph 12 (enhanced protection) applies in relation to the individual, Schedule 29 to FA 2004 (authorised lump sums – supplementary) has effect in relation to the individual as if—

(a)

in paragraph 1(1)(b) (pension commencement lump sum), the words “all or part of the member’s lump sum allowance is available, and” were omitted;

(b)

for paragraph 2 (pension commencement lump sum: definition of “permitted maximum”) there were substituted—

“2.

(1)

In paragraph 1 “the permitted maximum”, in relation to a lump sum, means the lower of—

(a)

the applicable amount in relation to the relevant pension (see paragraphs 2A to 2D), and

(b)

the amount specified in sub-paragraph (2).

(2)

That amount is—

(a)

the maximum amount of a pension commencement lump sum that could have been paid to the member on 5th April 2023 under the arrangement under which the entitlement to the lump sum arises, less

(b)

the aggregate of each pension commencement lump sum (if any) to which the member has previously become entitled after that date under that arrangement,

or, if that produces a negative amount, nil.

(3)

For the purposes of this paragraph, the maximum amount of a pension commencement lump sum that “could have been paid” on 5th April 2023 is to be determined on the assumption that any condition required to be met before such a payment could be made was met.

(4)

Sub-paragraphs (5) and (6) apply where—

(a)

it is necessary to determine for the purposes of this paragraph “the permitted maximum” in relation to a pension commencement lump sum paid after 5th April 2023 under an arrangement (“the paying arrangement”) under a registered pension scheme, and

(b)

as a result of one or more recognised transfers made in the post-5th April 2023 period, any of the sums and assets applied for the provision of the lump sum were, at any time before the payment of the lump sum, held for the purposes of another arrangement (“a predecessor arrangement”) under a different registered pension scheme.

(5)

The reference in sub-paragraph (2)(a) to the maximum amount of a pension commencement lump sum that could have been paid on 5th April 2023 under the paying arrangement, so far as the lump sum paid is referable to sums and assets that were held on that date for the purposes of a predecessor arrangement, is a reference to the maximum amount of a pension commencement lump sum that could have been paid on that date under that predecessor arrangement, had those sums and assets (and only those sums and assets) been applied for the provision of the lump sum.

(6)

A reference in sub-paragraph (2)(b) to a pension commencement lump sum to which the member has become entitled under the paying arrangement before the date on which the lump sum is paid includes a reference to a pension commencement lump sum paid under a predecessor arrangement, so far as it is referable to sums and assets applied for the provision of the pension commencement lump sum paid under the paying arrangement.

(7)

In this paragraph “the post-5th April 2023 period”, in relation to a lump sum, means the period beginning with 6 April 2023 and ending with the date on which the lump sum is paid.”.

(2)

If (and for so long as) Schedule 29 applies in relation to the individual subject to the modifications in sub-paragraph (1), paragraph 12A of this Schedule has effect in relation to the individual as if sub-paragraph (2)(a) of that paragraph (which contains modifications of Schedule 29 inconsistent with those in sub-paragraph (1)) were omitted.”.

“A1

If paragraph 12 (enhanced protection) does not apply in relation to the individual, Schedule 29 to FA 2004 (authorised lump sums – supplementary) has effect in relation to the individual as if in paragraph 1(1)(b) (pension commencement lump sum), the words “all or part of the member’s lump sum allowance is available, and” were omitted.”.

“(2)

Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if the amount specified in section 637P of that Act (individual’s lump sum allowance) were the lower of—

(a)

25% of the individual’s relevant amount21, and

(b)

£375,000.

(2A)

Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were the lower of—

(a)

if one or more lump sum and death benefit allowance enhancement factors operate in relation to the individual for the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s enhanced lump sum and death benefit allowance (as determined under that paragraph of that Schedule), and

(b)

otherwise, the lower of—

(i)

the individual’s relevant amount, and

(ii)

£1,500,000.

(2B)

For the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s “protected lump sum and death benefit allowance” is the lower of—

(a)

the individual’s relevant amount, and

(b)

£1,500,000.”.

“(2)

Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if—

(a)

the amount specified in section 637P of that Act (individual’s lump sum allowance) were £312,500, and

(b)

the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were—

(i)

if one or more lump sum and death benefit allowance enhancement factors operate in relation to the individual for the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s enhanced lump sum and death benefit allowance (as determined under that paragraph of that Schedule), and

(ii)

otherwise, £1,250,000.

(3)

For the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s “protected lump sum and death benefit allowance” is £1,250,000.”.

“Provision of information by individuals to certification administrators

127B.

(1)

Sub-paragraph (2) applies where—

(a)

a certification administrator issues a transitional tax-free amount certificate, and

(b)

there are one or more other certification administrators in relation to the individual to whom the certificate relates.

(2)

The relevant person must send a copy of the certificate to each certification administrator within sub-paragraph (1)(b).

(3)

Sub-paragraph (2) must be complied with—

(a)

before the end of the period of 90 days beginning with the day on which the relevant person receives the certificate, and

(b)

before the first day following that on which the relevant person receives the certificate on which a relevant benefit crystallisation event occurs in relation to the individual.

(4)

In the case of an obligation under sub-paragraph (2) relating to a pension scheme of which the individual is a member as a result of a block transfer, references in sub-paragraph (3) to the day on which the relevant person receives the certificate are to the later of that day and the day on which the relevant person receives notice of the block transfer.

(5)

Sub-paragraph (6) applies where—

(a)

a certification administrator cancels a transitional tax-free amount certificate, and

(b)

there are one or more other certification administrators in relation to the individual to whom the certificate relates.

(6)

The relevant person must send a copy of the notice to each certification administrator within sub-paragraph (5)(b).

(7)

Sub-paragraph (6) must be complied with—

(a)

before the end of the period of 90 days beginning with the day on which the relevant person receives notice of the cancellation, and

(b)

before the first day following that on which the relevant person receives notice of the cancellation on which a relevant benefit crystallisation event occurs in relation to the individual.

(8)

In the case of an obligation under sub-paragraph (6) relating to a pension scheme of which the individual is a member as a result of a block transfer, references in sub-paragraph (7) to the day on which the relevant person receives notice of the cancellation are to the later of that day and the day on which the relevant person receives notice of the block transfer.

(9)

In this paragraph—

“block transfer”: a transfer is “a block transfer” in relation to a member of a pension scheme if it involves the transfer, in a single transaction, of all the sums and assets held for the purposes of, or representing accrued rights under, the arrangements under the scheme which relate to the member and at least one other member of the scheme;

“relevant benefit crystallisation event” has the same meaning as in section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance);

“relevant person”, in relation to a transitional tax-free amount certificate, means—

(a)

the individual to whom the certificate relates, or

(b)

if the individual is deceased, the individual’s personal representatives.”.

““member” has the same meaning as in Part 4 of FA 2004;”.

“130A.

(1)

The amendments made by or under this Schedule, and the amendments made by section 14, are to be disregarded for the purposes of determining—

(a)

the extent (if any) to which a transitional lump sum is a lump sum of a description permitted to be paid by the lump sum rule in section 166(1) of FA 2004, and

(b)

the tax treatment under Part 9 of ITEPA 2003 of a transitional lump sum.

(2)

In this paragraph “transitional lump sum” means a lump sum to which a member of a registered pension scheme becomes entitled before 6 April 2024 and which is paid on or after that date.

(3)

In sub-paragraph (2) “member” has the same meaning as in Part 4 of FA 2004.”

“131.

(1)

The amendments made by or under this Schedule, and the amendments made by section 14, are to be disregarded for the purposes of determining the tax treatment under Part 9 of ITEPA 2003 of a transitional lump sum death benefit.

(2)

In section 637S (availability of individual’s lump sum and death benefit allowance), “relevant lump sum death benefit” does not include a transitional lump sum death benefit.

(3)

In this paragraph “transitional lump sum death benefit” means a lump sum death benefit paid on or after 6 April 2024 so far as relating to rights that, before that date, crystallised under section 216 of FA 2004.”