Legalize / United Kingdom / Public General Act

Finance Act 2004

Type Public General Act

Publication 2004-07-22

Last updated 2025-04-24

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(a) in a case where the transfer is an onward transfer and the overseas transfer charge under section 244IA(1) arose in relation to the original transfer, 25% of so much of the transferred value of the original transfer as did not exceed the amount of the member’s overseas transfer allowance that was available on the making of the original transfer;

(b) in any other case, 25% of the transferred value.

(2) Where the overseas transfer charge arises under section 244IA in relation to a transfer, the charge is 25% of so much of the transferred value as exceeds the amount of the member’s overseas transfer allowance that is available on the making of the transfer.

278A

(1) For the purposes of this Part, a pension credit is “disqualifying” if, when the member becomes entitled to it, the person subject to the corresponding pension debit has an actual (rather than a prospective) right to payment of a pension under the relevant arrangement.

(2) The “relevant arrangement” is the arrangement to which the pension sharing order, or provision by virtue of which the member becomes entitled to the pension credit, relates.

278B

(1) For the purposes of this Part, a dependants' annuity is “related to” a lifetime annuity payable to a member of a registered pension scheme if—

(a) they are purchased either in the form of a joint life annuity or separately in circumstances in which the day on which the one is purchased is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased, and

(b) the dependants’ annuity will be payable to a dependant of the member.

(2) For the purposes of this Part, a nominees’ annuity is “related to” a lifetime annuity payable to a member of a registered pension scheme if—

(a) they are purchased either in the form of a joint life annuity or separately in circumstances in which the day on which the one is purchased is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased, and

(b) the nominees’ annuity will be payable to a nominee of the member.

(3) For the purposes of this Part, a dependants’ scheme pension is “related to” a scheme pension payable to a member of a registered pension scheme if—

(a) the day on which one is purchased or sums or assets are applied for its provision is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased or sums or assets are applied for its provision, and

(b) the dependants’ scheme pension will be payable to a dependant of the member.

2A

(1) This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is income withdrawal.

(2) The applicable amount is one third of the scheme pension capital value.

(3) The scheme pension capital value is (subject to sub-paragraph (4)) the aggregate of—

(a) the sums designated as available for the payment of drawdown pension on that occasion, and

(b) the market value of the assets so designated.

(4) There is to be deducted from the amount determined under sub-paragraph (3) so much (if any) of the sums and assets designated as mentioned in sub-paragraph (3)(a) or (b) as represent rights attributable to a disqualifying pension credit.

2B

(1) This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is a lifetime annuity.

(2) The applicable amount is one third of the annuity purchase price.

(3) The annuity purchase price is (subject to sub-paragraph (4)) the aggregate of—

(a) such of the sums held for the purposes of the pension scheme, and

(b) the market value of such of the assets held for the purposes of the pension scheme,

as are applied in (or in connection with) the purchase of the lifetime annuity and any related dependants’ annuity and any related nominees’ annuity.

(4) There is to be deducted from the amount determined under sub-paragraph (3)—

(a) if the sums or assets applied in (or in connection with) the purchase of the annuity or any related dependants’ annuity or any related nominees’ annuity consist of, or include, sums or assets representing the whole or part of the member’s drawdown pension fund or of the member's flexi-access drawdown fund, the aggregate of those sums and the market value of those assets, and

(b) in any case, so much (if any) of the sums or assets applied in (or in connection with) the purchase of the annuity or any related dependants’ annuity or any related nominees’ annuity as represents rights which are attributable to a disqualifying pension credit.

2C

(1) This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is a scheme pension under—

(a) ... a defined benefits arrangement, or

(b) a collective money purchase arrangement.

(2) The applicable amount is (subject to sub-paragraphs (3) and (4))—

$$A+(B×)-4$where—A is the amount of the lump sum;B is the relevant valuation factor (see section 276);C is the amount of the pension which will be payable to the member in the period of 12 months beginning with the day on which the member becomes entitled to the pension (assuming that it remains payable throughout that period at the rate at which it is payable on that day);...$

(3) In determining C for the purposes of sub-paragraph (2) in a case in which the pension is under a public service pension scheme, any abatement of the pension is to be left out of account.

(4) For the purposes of sub-paragraph (2), any part of what would otherwise be A or C which represents rights attributable to a disqualifying pension credit is to be disregarded.

2D

(1) This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is a scheme pension under a money purchase arrangement that is not a collective money purchase arrangement.

(2) The applicable amount is one third of the scheme pension purchase price.

(3) The scheme pension purchase price is (subject to sub-paragraph (4)) the aggregate of—

(a) such of the sums held for the purposes of the pension scheme, and

(b) the market value of such of the assets held for the purposes of the pension scheme,

as are applied in (or in connection with) the purchase or provision of the scheme pension and any related dependants’ scheme pension.

(4) There is to be deducted from the amount determined under sub-paragraph (3)—

(a) if the scheme pension is funded (in whole or in part) by the application of sums or assets representing the whole or part of the member’s drawdown pension fund or of the member’s flexi-access drawdown fund, the aggregate of those sums and the market value of those assets, and

(b) in any case, so much (if any) of the sums and assets referred to in sub-paragraph (3)(a) and (b) as represent rights which are attributable to a disqualifying pension credit.

Pension commencement lump sums: anti-avoidance

3B

(1) Sub-paragraph (2) applies if—

(a) sums or assets held for the purposes of, or representing accrued rights under, a money purchase arrangement relating to the member under a registered pension scheme (“member money purchase funds”) are subject to a relevant surrender or a relevant transfer,

(b) the sole or main purpose of the relevant surrender or relevant transfer is to increase the applicable amount for the purposes of paragraph 2 on the member becoming entitled to a scheme pension, and

(2) The pension scheme under which the relevant defined benefits arrangement is an arrangement is to be treated as making an unauthorised payment to the member of the amount by which—

(a) the applicable amount in relation to the relevant defined benefits arrangement (as determined under paragraph 2C), exceeds

(b) what would be the applicable amount (as determined under paragraph 2D) if the arrangement were a money purchase arrangement.

(3) For the purposes of sub-paragraph (1)—

(a) member money purchase funds are subject to a “relevant surrender” if they are surrendered and, in consequence of the surrender, there is a corresponding increase in the sums or assets held for the purposes of, or representing rights under, a defined benefits arrangement relating to the member under the pension scheme (or such an arrangement is established), and

(b) member money purchase funds are subject to a “relevant transfer” if they are transferred so as to become held for the purposes of, or to represent rights under, a defined benefits arrangement relating to the member under any other registered pension scheme.

(4) In this paragraph “relevant defined benefits arrangement” means—

(a) the defined benefits arrangement mentioned in paragraph (a) or (b) of sub-paragraph (3), or

(b) any other defined benefits arrangement relating to the member (under the pension scheme or any other registered pension scheme) in the case of which any of the sums or assets held for the purposes of, or representing accrued rights under, the arrangement directly or indirectly represent sums or assets previously held for the purposes of, or representing accrued rights under, the defined benefits arrangement so mentioned.

Pension commencement excess lump sum

3C

(1) For the purposes of this Part a lump sum is a pension commencement excess lump sum if—

(a) the member becomes entitled to it in connection with becoming entitled to a relevant pension (or dies after becoming entitled to it but before becoming entitled to the relevant pension in connection with which it was anticipated that the member would become entitled to it);

(b) it is paid when none of the member’s lump sum allowance , or when none of the individual’s lump sum and death benefit allowance, is available (see paragraph 12A);

(c) it is paid within the period beginning six months before, and ending one year after, the day on which the member becomes entitled to it;

(d) it does not reduce the rate of payment of any pension to which the member has become (actually) entitled, or extinguish the member’s entitlement to payment of any such pension;

(e) it is paid when the member has reached normal minimum pension age (or the ill-health condition is met); and

(f) it is not an excluded lump sum (see sub-paragraph (4)).

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) A lump sum is an “excluded lump sum” if—

(a) it would, apart from this paragraph, be permitted to be paid under the lump sum rule in section 166, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) In determining for the purposes of this paragraph—

(a) whether any of a member’s lump sum allowance or lump sum and death benefit allowance is available on the payment of a lump sum, ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

the member is treated as having already become entitled to any pension commencement lump sum that is paid to the member in connection with becoming entitled to the relevant pension.

12A

(1) In this Part of this Schedule, a reference to the amount of an individual’s lump sum allowance that is available on the individual becoming entitled to a lump sum, or being paid a lump sum, is to the amount of that allowance that would be so available on the following assumption.

(2) The assumption is that the individual becoming entitled to or (as the case may be) being paid the lump sum was a relevant benefit crystallisation event within the meaning of section 637Q of ITEPA 2003 (availability of individual’s lump sum allowance).

(3) In this Part of this Schedule, a reference to the amount of an individual’s lump sum and death benefit allowance that is available on the individual becoming entitled to a lump sum, or being paid a lump sum, is to the amount of that allowance that would be so available on the following assumption.

(4) The assumption is that the individual becoming entitled to or (as the case may be) being paid the lump sum was a relevant benefit crystallisation event within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance).

Introduction

A1

(1) This Schedule applies for the purposes of sections 232 and 236.

(2) In this Schedule—

(a) paragraph A2 sets out the events that are benefit crystallisation events in relation to an individual;

(b) subsequent paragraphs give the meaning of expressions used in paragraph A2.

The benefit crystallisation events

A2

(1) Benefit crystallisation event 1 occurs in relation to an individual if sums or assets held for the purposes of a money purchase arrangement under any of the relevant pension schemes are designated as available for the payment of drawdown pension to the individual.

(2) Benefit crystallisation event 2 occurs in relation to an individual if the individual becomes entitled to a scheme pension under any of the relevant pension schemes.

(3) Benefit crystallisation event 3 occurs in relation to an individual if the individual, having become so entitled, becomes entitled to payment of the scheme pension, otherwise than in excepted circumstances, at an increased annual rate which—

(a) exceeds the threshold annual rate, and

(b) exceeds by more than the permitted margin the rate at which it was payable on the day on which the individual became entitled to it.

(4) Benefit crystallisation event 4 occurs in relation to an individual if the individual becomes entitled to a lifetime annuity purchased under a money purchase arrangement under any of the relevant pension schemes.

(5) Benefit crystallisation event 6 occurs in relation to an individual if the individual becomes entitled to a relevant lump sum under any of the relevant pension schemes.

5ZA

(1) The provisions of Chapter 15A of Part 9 of ITEPA 2003 (lump sums under registered pension schemes) do not apply in relation to—

(a) a serious ill-health lump sum paid to a transfer member of a relevant non-UK scheme, or

(b) an authorised lump sum death benefit paid in respect of a transfer member of a relevant non-UK scheme who (at the time of the payment) is under 75.

(2) In this paragraph “authorised lump sum death benefit” means a lump sum death benefit permitted by the lump sum death benefit rule in section 168 of this Act to be paid in respect of a member of a registered pension scheme.

Enhancement of allowances

12A

(1) The provisions of Schedule 36 relating to the enhancement of an individual’s lump sum allowance and lump sum and death benefit allowance (“the enhancement of allowances provisions”) apply in relation to an individual who is a relieved member of a relieved non-UK pension scheme as if the relieved non-UK pension scheme were a registered pension scheme.

(2) A pension scheme is a relieved non-UK pension scheme if—

(a) relief from tax has been given in respect of contributions paid under the pension scheme by virtue of Schedule 33 (overseas pension schemes: migrant member relief),

(b) relief from tax has been so given at any time after 5th April 2006 under double tax arrangements, or

(c) a member of the pension scheme has been, or members of the pension scheme have been, exempt from liability to tax by virtue of section 307 of ITEPA 2003 (exemption for provision made by employer for retirement or death benefit) in respect of provision made under the pension scheme at any time after 5th April 2006 when the pension scheme was an overseas pension scheme.

(3) An individual is a relieved member of a relieved non-UK pension scheme if—

(a) any of the contributions in respect of which relief has been given as mentioned in sub-paragraph (2)(a) or (b) were contributions paid by or on behalf of, or in respect of, the individual, or

(b) the individual is the member, or one of the members, who has been exempt from liability to tax as mentioned in sub-paragraph (2)(c).

...

6A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pension credits from previously crystallised rights

20A

(1) This paragraph applies ... in relation to an individual where—

(a) the individual has (at any time after 5th April 2006 but before 6th April 2024) acquired rights under a registered pension scheme by reason of having become entitled to a pension credit,

(b) the pension credit derived from the same or another registered pension scheme,

(c) the rights under the registered pension scheme which became subject to the corresponding pension debit consisted of, or included, rights to a post-commencement pension in payment, and

(d) notice of intention to rely on this paragraph is given to His Majesty’s Revenue and Customs in accordance with regulations made by the Commissioners for His Majesty’s Revenue and Customs.

(2) “Post-commencement pension in payment” means a pension to which a person became entitled on or after 6th April 2006.

(3) 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 individual’s enhanced lump sum and death benefit allowance (as determined under paragraph 20H of this Schedule).

(3A) For the purposes of paragraph 20H, a lump sum and death benefit allowance enhancement factor, determined in accordance with sub-paragraphs (4) to (6) of this paragraph, operates in relation to the individual.

(4) The lump sum and death benefit allowance enhancement factor is the pension credit factor.

(5) The pension credit factor is—

$$ASLA$where—A is the post-commencement pension in payment portion of the amount which is the appropriate amount for the purposes of section 29(1) of WRPA 1999 or Article 26(1) of WRP(NI)O 1999 in relation to the pension credit;SLA is the standard lifetime allowance for the tax year in which the rights mentioned in sub-paragraph (1)(a) were acquired.$

(6) The post-commencement pension in payment portion of the appropriate amount referred to in the definition of A—

(a) in a case where the appropriate amount is arrived at under section 29(2) or (3)(b) of WRPA 1999 or Article 26(2) or (3)(b) of WRP(NI)O 1999, is so much of that amount as is attributable to rights to a post-commencement pension in payment;

(b) in a case where the appropriate amount is arrived at under section 29(3)(a) of WRPA 1999 or Article 26(3)(a) of WRP(NI)O 1999, is so much of that amount as is just and reasonable.

(7) In this paragraph and in paragraphs 20B to 20G, “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).

(8) Where this paragraph applies, for the purposes of this Part a lump sum is not an uncrystallised funds pension lump sum (see paragraph 4A of Schedule 29) if... the amount given by the formula in sub-paragraph (9) is less than 25% of the lump sum.

(9) The formula is—

$$A-B4$where—A is—in the case of an individual in relation to whom a relevant protection provision applies, the individual’s protected lump sum and death benefit allowance (see paragraph 6A(4));in any other case, £1,073,100;B is the amount that would be the previously-used amount within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance) if a relevant benefit crystallisation event within the meaning of that section had occurred immediately before the lump sum is paid.$

(10) A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year.

Non-residence: general

20B

(1) This paragraph applies ... in relation to an individual where—

(a) during any part of the period that is the active membership period in relation to an arrangement relating to the individual under a registered pension scheme, the individual is a relevant overseas individual, and

(b) notice of intention to rely on this paragraph is given to His Majesty’s Revenue and Customs in accordance with regulations made by the Commissioners for His Majesty’s Revenue and Customs.

(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 637R of that Act (individual’s lump sum and death benefit allowance) were the individual’s enhanced lump sum and death benefit allowance (as determined under paragraph 20H of this Schedule).

(2A) For the purposes of paragraph 20H, a lump sum and death benefit allowance enhancement factor, determined in accordance with paragraphs 20C and 20D, operates in relation to the individual.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) For the purposes of this Part an individual is a relevant overseas individual at any time if, at that time, the individual either is not a relevant UK individual or—

(a) is a relevant UK individual by virtue only of paragraph (c) of section 189(1) (individuals resident in UK at some time in previous five tax years), and

(b) is not employed by a person resident in the United Kingdom.

(6) In this paragraph and in paragraphs 20C and 20D “the active membership period”, in relation to an arrangement relating to the individual, is the period—

(a) beginning with the date on which the benefits first began to accrue to or in respect of the individual under the arrangement or, if later, 6th April 2006, and

(b) ending on 5th April 2024.

(7) But if benefits ceased to accrue to or in respect of the individual under the arrangement at a time before 5th April 2024, the active membership period is to be treated as having ended at that time.

(8) Where this paragraph applies, for the purposes of this Part a lump sum is not an uncrystallised funds pension lump sum (see paragraph 4A of Schedule 29) if... the amount given by the formula in sub-paragraph (9) is less than 25% of the lump sum.

(9) The formula is—

Non-residence: determination of lump sum and death benefit allowance enhancement factor (money purchase arrangements)

20C

(1) This paragraph contains provision for determining the lump sum and death benefit allowance enhancement factor mentioned in paragraph 20B(2A) in the case of an arrangement that is a money purchase arrangement.

(2) The lump sum and death benefit allowance enhancement factor is—

(a) if the arrangement is a cash balance arrangement, the cash balance arrangement non-residence factor (see sub-paragraphs (3) to (5)), and

(b) in any other case, the other money purchase arrangement non-residence factor (see sub-paragraphs (6) and (7)).

(3) The cash balance arrangement non-residence factor is—

(a) the factor arrived at by the application of sub-paragraph (4) in relation to the part of the active membership period during which the individual was a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was a relevant overseas individual, the aggregate of the factors arrived at by the application of sub-paragraph (4) in relation to each of those parts of that period.

(4) The factor arrived at by the application of this subsection in relation to any part of the active membership period is—

$$A-B£1,000,000$where—A is the closing value of the individual’s rights under the arrangement;B is the opening value of the individual’s rights under the arrangement. SLA is the standard lifetime allowance for the tax year in which that part of that period ended.$

(5) For the purposes of sub-paragraph (4)—

(a) the closing value of the individual's rights under the arrangement is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the end of that part of that period, and

(b) the opening value of the individual's rights under the arrangement is the amount which would, on the valuation assumptions, be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the beginning of that part of that period.

(6) The other money purchase arrangement non-residence factor is—

(a) the factor arrived at by the application of sub-paragraph (7) in relation to the part of the active membership period during which the individual was a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was a relevant overseas individual, the aggregate of the factors arrived at by the application of sub-paragraph (7) in relation to each of those parts of that period.

(7) The factor arrived at by the application of this sub-paragraph in relation to any part of the active membership period is—

$$C£1,000,000$where C is the amount of the contributions made under the arrangement by or in respect of the individual in any part of the active membership period during which the individual is a relevant overseas individual. SLA is the standard lifetime allowance for the tax year in which that part of that period ended.$

(8) A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year.

Non-residence: determination of lump sum and death benefit allowance enhancement factor (other arrangements)

20D

(1) This paragraph contains provision for determining the lump sum and death benefit allowance enhancement factor mentioned in paragraph 20B(2A) in the case of an arrangement that is not a money purchase arrangement.

(2) The lump sum and death benefit allowance enhancement factor is—

(a) if the arrangement is a defined benefits arrangement, the defined benefits arrangement non-residence factor (see sub-paragraphs (3) and (4)), and

(b) if the arrangement is a hybrid arrangement, the hybrid arrangement non-residence factor (see sub-paragraphs (5) to (7)).

(3) The defined benefits arrangement non-residence factor is—

(a) the factor arrived at by the application of sub-paragraph (4) in relation to the part of the active membership period during which the individual was a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was a relevant overseas individual, the aggregate of the factors arrived at by the application of sub-paragraph (4) in relation to each of those parts of that period.

(4) The factor arrived at by the application of this sub-paragraph in relation to any part of the active membership period is—

$$A×B+C-A×D+E£1,000,000$where—A is the relevant valuation factor (see section 276);B is the amount of the annual rate of the pension which would, on the valuation assumptions (see section 277), be payable to the individual under the arrangement if the individual became entitled to payment of it at the end of that part of that period;C is the amount of the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement t (otherwise than by commutation of pension) if the individual became entitled to payment of it at the end of that part of that period;D is the amount of the annual rate of the pension which would, on the valuation assumptions, be payable to the individual under the arrangement if the individual became entitled to payment of it at the beginning of that part of that period;E is the amount of the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement (otherwise than by commutation of pension) if the individual became entitled to payment of it at the beginning of that part of that period. SLA is the standard lifetime allowance for the tax year in which that part of that period ended.$

(5) The hybrid arrangement non-residence factor is the greater or greatest of such of—

(a) what would be the cash balance arrangement non-residence factor (under section 222) if the arrangement were a cash balance arrangement,

(b) what would be the other money purchase arrangement non-residence factor (under that section) if the arrangement were a collective money purchase arrangement,

(c) what would be the other money purchase arrangement non-residence factor (under that section) if the arrangement were a money purchase arrangement other than a cash balance arrangement or a collective money purchase arrangement, and

(d) what would be the defined benefits arrangement non-residence factor (under sub-paragraphs (3) and (4)) if the arrangement were a defined benefits arrangement,

as are relevant factors in relation to the arrangement.

(6) A factor is a relevant factor in relation to a hybrid arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under the arrangement may be benefits linked to that factor.

(7) For the purposes of sub-paragraph (6)—

(a) cash balance benefits are linked to the cash balance arrangement non-residence factor;

(b) other money purchase benefits are linked to the other money purchase arrangement non-residence factor;

(8) A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year.

Transfers from recognised overseas pension scheme: general

20E

(1) This paragraph applies ... in relation to an individual where—

(a) at any time after 5th April 2006 but before 6th April 2024, there has been a recognised overseas scheme transfer, and

(b) notice of intention to rely on it is given to His Majesty’s Revenue and Customs in accordance with regulations made by the Commissioners for His Majesty’s Revenue and Customs.

(2) There is a “recognised overseas scheme transfer” if any sums or assets—

(a) held for the purposes of an arrangement under a recognised overseas pension scheme, or

(b) representing accrued rights under such an arrangement,

are transferred so as to become held for the purposes of, or to represent rights under, an arrangement under a registered pension scheme relating to the individual.

(3) The arrangement specified in sub-paragraph (2)(a) or (b) is referred to in this paragraph and in paragraphs 20F and 20G as the “recognised overseas scheme arrangement”.

(4) 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 individual’s enhanced lump sum and death benefit allowance (as determined under paragraph 20H of this Schedule).

(4A) For the purposes of paragraph 20H, a lump sum and death benefit allowance enhancement factor, determined in accordance with sub-paragraphs (5) and (6) of this paragraph, operates in relation to the individual.

(5) The lump sum and death benefit allowance enhancement factor is the recognised overseas scheme transfer factor.

(6) The recognised overseas scheme transfer factor is—

$$A-B£1,000,000$where—A is the aggregate of the amount of any sums transferred, and the market value of any assets transferred, on the recognised overseas scheme transfer;B is the relevant relievable amount (see paragraphs 20F and 20G).SLA is the standard lifetime allowance for the tax year in which the transfer took place.$

(7) In this paragraph and in paragraphs 20F and 20G “the overseas arrangement active membership period” is the period—

(a) beginning with the date on which the benefits first began to accrue to or in respect of the individual under the recognised overseas scheme arrangement or, if later, 6th April 2006, and

(b) ending on 5th April 2024.

(8) But if benefits ceased to accrue to or in respect of the individual under the recognised overseas scheme arrangement at a time before 5th April 2024, the overseas arrangement active membership period is to be treated as having ended at that time.

(9) Where this paragraph applies, for the purposes of this Part a lump sum is not an uncrystallised funds pension lump sum (see paragraph 4A of Schedule 29) if ... the amount given by the formula in sub-paragraph (10) is less than 25% of the lump sum.

(10) The formula is—

$$A-B4$where—A is—in the case of an individual in relation to whom a relevant protection provision applies, the individual’s protected lump sum and death benefit allowance...;in any other case, £1,073,100;B is the amount that would be the previously-used amount within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance) if a relevant benefit crystallisation event within the meaning of that section had occurred immediately before the lump sum is paid.$

(11) A reference in this paragraph to the standard lifetime allowance for a tax year is to the standard lifetime allowance as determined under section 218, as it had effect for that tax year.

Overseas scheme transfers: determination of relevant relievable amount (money purchase arrangements)

20F

(1) This paragraph contains provision for determining the relevant relievable amount mentioned in the definition of B in paragraph 20E(6) in the case of a recognised overseas scheme arrangement that was a money purchase arrangement.

(2) The relevant relievable amount is—

(a) if the recognised overseas scheme arrangement was a cash balance arrangement, the cash balance relevant relievable amount (see sub-paragraphs (3) to (5)), and

(b) if the recognised overseas scheme arrangement was any other sort of money purchase arrangement, the other money purchase relevant relievable amount (see sub-paragraphs (6) and (7)).

(3) The cash balance relevant relievable amount is—

(a) the amount arrived at by the application of sub-paragraph (4) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of sub-paragraph (4) in relation to each of those parts of that period.

(4) The amount arrived at by the application of this subsection in relation to any part of the overseas arrangement active membership period is—

$$A-B$where—A is the closing value of the individual’s rights under the arrangement, andB is the opening value of the individual’s rights under the arrangement.$

(5) For the purposes of sub-paragraph (4)—

(a) the closing value of the individual's rights under the recognised overseas scheme arrangement is the amount which would, on the valuation assumptions (see section 277), be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the end of that part of that period, and

(b) the opening value of the individual's rights under the arrangement is the amount which would, on the valuation assumptions, be available for the provision of benefits to or in respect of the individual under the arrangement if the individual became entitled to the benefits at the beginning of that part of that period.

(6) The other money purchase relevant relievable amount is—

(a) the amount arrived at by the application of sub-paragraph (7) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of sub-paragraph (7) in relation to each of those parts of that period.

(7) The amount arrived at by the application of this sub-paragraph in relation to any part of the overseas arrangement active membership period is the amount of the contributions made under the arrangement by or in respect of the individual in any part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual.

Overseas scheme transfers: determination of relevant relievable amount (other arrangements)

20G

(1) This paragraph contains provision for determining the relevant relievable amount mentioned in the definition of B in paragraph 20E(6) in the case of a recognised overseas scheme arrangement that was not a money purchase arrangement.

(2) The relevant relievable amount is—

(a) if the recognised overseas scheme arrangement was a defined benefits arrangement, the defined benefits relevant relievable amount (see sub-paragraphs (3) and (4)), and

(b) if the recognised overseas scheme arrangement was a hybrid arrangement, the hybrid relevant relievable amount (see sub-paragraph (5) to (7)).

(3) The defined benefits relevant relievable amount is—

(a) the amount arrived at by the application of sub-paragraph (4) in relation to the part of the overseas arrangement active membership period during which the individual was not a relevant overseas individual, or

(b) if there have been two or more parts of that period during which the individual was not a relevant overseas individual, the aggregate of the amounts arrived at by the application of sub-paragraph (4) in relation to each of those parts of that period.

(4) The amount arrived at by the application of this subsection in relation to any part of the overseas arrangement active membership period is—

$$A×B+C-A×D+E$where—A is the relevant valuation factor (see section 276);B is the annual rate of the pension which would, on the valuation assumptions (see section 277), be payable to the individual under the recognised overseas scheme arrangement if the individual became entitled to payment of it at the end of that part of that period;C is the amount of the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement (otherwise than by commutation of pension) if the individual became entitled to payment of it at the end of that part of that period;D is the annual rate of the pension which would, on the valuation assumptions, be payable to the individual under the arrangement if the individual became entitled to payment of it at the beginning of that part of that period;E is the amount of the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement (otherwise than by commutation of pension) if the individual became entitled to payment of it at the beginning of that part of that period.$

(5) The hybrid relevant relievable amount is the greater or greatest of such of—

(a) what would be the cash balance relevant relievable amount (under section 225) if the recognised overseas scheme arrangement had been a cash balance arrangement,

(b) what would be the other money purchase relevant relievable amount (under that section) if that arrangement had been a collective money purchase arrangement,

(c) what would be the other money purchase relevant relievable amount (under that section) if that arrangement had been a money purchase arrangement other than a cash balance arrangement or a collective money purchase arrangement, and

(d) what would be the defined benefits relevant relievable amount (under sub-paragraph (3) and (4)) if that arrangement had been a defined benefits arrangement,

as are relevant to that arrangement.

(6) An amount is relevant to a hybrid arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under the arrangement may be benefits linked to that amount.

(7) For the purposes of sub-paragraph (6)—

(a) cash balance benefits are linked to the cash balance relevant relievable amount;

(b) other money purchase benefits are linked to the other money purchase relevant relievable amount;

Protected pension age: scheme rights existing before 4 November 2021

29A

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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—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, lessthe 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—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, lessthe 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—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, lessthe 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—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, lessthe 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—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, lessthe 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—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, lessthe 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) (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 + A × B$where—A is—in the case of an individual in relation to whom a relevant protection provision applies, the individual’s protected lump sum and death benefit allowance (as defined in that provision);B is the aggregate of the lump sum and death benefit allowance enhancement factors that operate in relation to the individual.$

(3) The following provisions are “relevant protection provisions”—

(a) paragraph 7 of this Schedule (primary protection);

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

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

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

(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),

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

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

Protected pension age: scheme rights existing before 4 November 2021

34A

(1) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) applies in relation to a paragraph 34 pension commencement lump sum as if—

(a) for section 637A (pension commencement lump sums), there were substituted—

(637A) (1) Subject to subsection (2), no liability to income tax arises on a pension commencement lump sum paid under a registered pension scheme. (2) If— (a) a pension commencement lump sum is paid under a registered pension scheme, and (b) the lump sum exceeds the amount of the member’s lump sum and death benefit allowance that is available on the member becoming entitled to it, section 579A (pensions) applies to the excess as it applies to any pension under a registered pension scheme.

;

(b) in section 637Q (availability of individual’s lump sum allowance), for subsection (6) there were substituted—

(6) In subsection (5) “non-taxable amount”, in relation to the individual becoming entitled to a pension commencement lump sum, means the lower of— (a) so much (if any) of the lump sum as is not subject to the charge to income tax by virtue of any provision of this Chapter, and (b) the amount given by the formula— $C+D4$ where C and D have the same meaning as in sub-paragraph (3) of paragraph 2 of Schedule 29 to FA 2004 (definition of “the permitted maximum”) as that paragraph applies in relation to the lump sum. (6A) In subsection (5) “non-taxable amount”, in relation to the individual becoming entitled to an uncrystallised funds pension lump sum, means so much (if any) of the lump sum as is not subject to the charge to income tax by virtue of any provision of this Chapter.

(2) In sub-paragraph (1) “paragraph 34 pension commencement lump sum” means a pension commencement lump sum the permitted maximum of which is determined under paragraph 2 of Schedule 29 as modified by paragraph 34 (3).

Overseas transfer charge: interpretation

Protected pension age: scheme rights existing before 6 April 2006

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