LegalizeThe Registered Pension Schemes (Transfer of Sums and Assets) Regulations 2006
Made: 28th February 2006
Laid before the House of Commons: 1st March 2006
Coming into force: 6th April 2006
The Commissioners for Her Majesty’s Revenue and Customs, in exercise of the powers conferred by section 169(1B), (1C), (1D) and (1E) of, and paragraphs 2(4)(h) and (6A), 3(2B) and (2C), 6(1B) and (1C), 16(2A) and (2B), 17(3) and (4) and 20(1B) and (1C) of Schedule 28 to, the Finance Act 2004[^f00001], and now exercisable by them[^f00002], make the following Regulations:
Citation and commencement
1
These Regulations may be cited as the Registered Pension Schemes (Transfer of Sums and Assets) Regulations 2006 and shall come into force on 6th April 2006.
Interpretation
2
In these Regulations “Part”, “section” or “Schedule”, without more, means a Part, section or Schedule of the Finance Act 2004.
Scheme pension payable by registered pension scheme - recognised transfers
3
- (1) A transfer within section 169(1) or (1A) (recognised transfer) of sums or assets which represent rights in respect of a scheme pension to which a member of a registered pension scheme has become entitled (“the original scheme pension”) is not a recognised transfer unless those sums and assets are, after the transfer, applied towards the provision of a scheme pension (a “new scheme pension”).
- (2) If the sums and assets are so applied, the new scheme pension is to be treated as if it were the original scheme pension for the purposes of Part 4 prescribed in table 1.
- (3) Paragraphs (1) and (2) do not apply in relation to a transfer within section 169(1) or (1A) of sums or assets which, before the transfer, were held for the purposes of paying CMP periodic income.
- (4) Such a transfer is not a recognised transfer unless the sums and assets transferred are, after the transfer, applied towards the provision of a drawdown pension (within the meaning given by paragraph 4 of Schedule 28).
Scheme pension payable by insurance company
4
If—
- (a) a scheme pension payable by an insurance company selected by the scheme administrator of a registered pension scheme (“the original scheme pension”) ceases to be payable, and
- (b) in consequence of the transfer of sums or assets (or both) from the insurance company to another insurance company in connection with the original scheme pension ceasing to be payable, another scheme pension becomes payable by the other insurance company (“the new scheme pension”),
the new scheme pension is to be treated as if it were the original scheme pension for the purposes of Part 4 prescribed in table 1.
| Provision | Purpose |
|---|---|
| Section 165(1), pension rule 1 | To determine whether the individual has reached the normal minimum pension age by reference to the day on which the original scheme pension was first paid. |
| Section 216(1), benefit crystallisation event 2 (benefit crystallisation event on becoming entitled to a scheme pension) | To determine whether the individual has become entitled to a scheme pension by reference to the original scheme pension (to prevent a benefit crystallisation event occurring in relation to the individual becoming entitled to the new scheme pension). |
| Section 216(1), benefit crystallisation event 3 (benefit crystallisation event on becoming entitled to a scheme pension at an increased rate) | To determine the rate at which the scheme pension was payable on the day on which the individual became entitled to it by reference to the rate payable in relation to the original scheme pension. |
| Paragraph 2A(3) and (5) of Schedule 28 (unauthorised payments) | To determine—the rate payable when the member became entitled to the pension, andthe amount of any lump sum on which there is no liability to tax to which the member became entitled in conjunction with the pension,by reference to the original scheme pension. |
| Paragraph 1(1) and (3)(a) of Schedule 29 (pension commencement lump sum) | To determine whether the member has become entitled to a lump sum in connection with the member becoming entitled to the scheme pension by reference to the original scheme pension (to prevent a lump sum to which a member becomes entitled in connection with becoming entitled to the new scheme pension being a pension commencement lump sum). |
| Paragraph 14(3) of Schedule 29 (pension protection lump sum death benefit) | To determine—the amount crystallised by reason of the member becoming entitled to the pension (AC) by reference to the member becoming entitled to the original scheme pension,the amount of pension paid (AP) as that paid in respect of the original scheme pension and the new scheme pension in respect of the period between the member becoming entitled to the original scheme pension and the member’s death,the total amount of pension protection lump sum death benefit (TPLS) by reference to that paid in respect of the original scheme pension and the new scheme pension. |
| Paragraph 16(3) of Schedule 29 (annuity protection lump sum death benefit) | To determine—the amount crystallised by reason of the member becoming entitled to the pension (AC) by reference to the member becoming entitled to the original scheme pension,the amount of pension paid (AP) as that paid in respect of the original scheme pension and the new scheme pension in respect of the period between the member becoming entitled to the original scheme pension and the member’s death, andthe total amount of annuity protection lump sum death benefit (TPLS) by reference to that paid in respect of the original scheme pension and the new scheme pension. |
| Paragraph 20(2), (3) and (5) of Schedule 36 (pre-commencement pensions) | To determine—(i) whether an individual has pre-commencement pension rights,(ii) whether an individual has a relevant existing pension. |
Term and reduction in the rate of scheme pension
5
- (1) In a case within regulation 3(1) or (2) or regulation 4, a reduction of the original scheme pension is a prescribed circumstance for the purposes of paragraph 2(4) of Schedule 28 (scheme pension: satisfying conditions) if—
- (a) the rate of the pension payable under the new scheme pension on the day on which the member becomes entitled to it is not less than the rate payable under the original scheme pension immediately before the original scheme pension ceased to be payable save to the extent that any reduction reflects the reasonable administration costs of the transfer of sums or assets; and
- (b) where the new scheme pension is payable until the later of the member’s death and the end of a term certain, that term ends on or before the date on which the term certain under the original scheme pension would have ended.
- (2) In paragraph (1)(a) “administration costs” includes, in particular, payments of overseas transfer charge.
Lifetime annuity – unauthorised payments and prescribed purposes
6
- (1) In a case within paragraph 3(2B)(a) of Schedule 28 (transfer of sums or assets on cessation of lifetime annuity) where a new lifetime annuity becomes payable, the new lifetime annuity is to be treated as if it were the original lifetime annuity for the purposes of Part 4 prescribed in table 2 to the extent that the amount of the sums and the value of the assets applied to purchase the new lifetime annuity are equal to the amount of the sums and the value of the assets transferred.
- (2) In any other case within paragraph 3(2B), the relevant registered pension scheme is to be treated as making an unauthorised payment to the member of an amount equal to the aggregate of the amount of the sums and the market value of the assets transferred.
| Provision | Purpose |
|---|---|
| Section 165(1), pension rule 1 | To determine whether the individual has reached the normal minimum pension age by reference to the day on which the original lifetime annuity was first paid. |
| Section 172A (surrender) | To determine for the purposes of section 172A(1) and (2) whether a surrender of (or agreement to surrender) rights to payments under a lifetime annuity has occurred. |
| Section 216(1), benefit crystallisation event 4 (benefit crystallisation event on becoming entitled to a lifetime annuity) | To determine whether the individual has become entitled to a lifetime annuity by reference to the original annuity (to prevent a benefit crystallisation event occurring in relation to the individual becoming entitled to the new lifetime annuity). |
| Paragraph 1(1) and (3)(a) of Schedule 29 (pension commencement lump sum) | To determine whether the member has become entitled to a lump sum in connection with the member becoming entitled to a lifetime annuity by reference to the original annuity (to prevent a lump sum to which a member becomes entitled in connection with becoming entitled to the new lifetime annuity being a pension commencement lump sum). |
| Paragraph 16(3) of Schedule 29 (annuity protection lump sum death benefit) | To determine—the amount crystallised by reason of the member becoming entitled to the annuity (AC) by reference to the member becoming entitled to the original lifetime annuity,the amount of pension paid (AP) as that paid in respect of the original lifetime annuity and the new lifetime annuity in respect of the period between the member becoming entitled to the original lifetime annuity and the member’s death,the total amount of annuity protection lump sum death benefit (TPLS) by reference to that paid in respect of the original lifetime annuity and the new lifetime annuity. |
Short–term annuity – unauthorised payments
7
- (1) In any case within paragraph 6(1B) of Schedule 28 (transfer of sums and assets on cessation of short-term annuity) except where a new short-term annuity becomes payable, the relevant registered pension scheme is to be treated as making an unauthorised payment to the member of an amount equal to the aggregate of the amount of the sums and the market value of the assets transferred.
- (2) In any case within paragraph 6(1B) where a new short-term annuity becomes payable, the new short-term annuity is to be treated as if it were the original short-term annuity for the purposes prescribed in paragraph (3).
- (3) The prescribed purposes are to determine, in relation to pension rule 1 in section 165(1), whether the individual has reached the normal minimum pension age by reference to the day on which the original short-term annuity was first paid.
Dependants' scheme pension payable by registered pension scheme - recognised transfers
8
A transfer within section 169(1) or (1A) of sums or assets which represent rights in respect of a dependants' scheme pension to which a dependant of a member of a registered pension scheme has become entitled in respect of the member (“the original dependants' scheme pension”) is not a recognised transfer unless those sums and assets are, after the transfer, applied towards the provision of a dependants' scheme pension (a “new dependants' scheme pension”).
Dependants' scheme pension payable by an insurance company - unauthorised payments
9
In any case within paragraph 16(2A) of Schedule 28 (transfer of sums or assets on cessation of payment of a dependants' scheme pension by an insurance company) except where a new dependants' scheme pension becomes payable, the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the amount of the sums and the market value of the assets transferred.
Dependants’ annuity - unauthorised payments
10
- (1) In any case within paragraph 17(3) of Schedule 28 (transfer of sums or assets on cessation of dependants’ annuity) where a new dependants’ annuity becomes payable, the new dependants’ annuity is to be treated as if it were the original dependants’ annuity for the purposes of Part 4 prescribed in table 2A to the extent that the amount of the sums and the value of the assets applied to purchase the new dependants’ annuity are equal to the amount of the sums and the value of the assets transferred.
- (2) In any other case within paragraph 17(3), except where a new dependants’ annuity becomes payable, the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the amount of the sums and the market value of the assets transferred.
| Provision | Purpose |
|---|---|
| Section 172A (surrender) | To determine for the purposes of section 172A(1) and (2) whether a surrender of (or agreement to surrender) rights to payments under a dependants’ annuity has occurred. |
Dependants' short-term annuity - unauthorised payments
11
In any case within paragraph 20(1B) of Schedule 28 (transfer of sums or assets on cessation of dependants' short-term annuity) except where a new dependant' short-term annuity becomes payable, the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the amount of the sums and the market value of the assets transferred.
Unsecured pension fund, alternatively secured pension fund, dependants' unsecured pension fund and dependants' alternatively secured pension fund - recognised transfers and prescribed purposes
12
- (1) A transfer within section 169(1) of sums or assets which represent a member's flexi-access drawdown fund, dependant's flexi-access drawdown fund, nominee's flexi-access drawdown fund, successor's flexi-access drawdown fund, member’s drawdown pension fund or dependant’s drawdown pension fund under an arrangement (“the old arrangement”), is not a recognised transfer unless all of those sums and assets become held under an arrangement under which no other sums or assets are held (“the new arrangement”).
- (2) In a case where the sums and assets become so held, the sums and assets transferred are to be treated as remaining sums and assets held under the old arrangement for the purposes prescribed—
- (za) in the case of a member's flexi-access drawdown fund, in the entries in table 3 for provisions not in Schedule 28,
- (a) in table 3 in the case of a member’s drawdown pension fund, and
- (b) in table 4 in the case of a dependant’s drawdown pension fund.
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