Taxation of Pensions Act 2014

JurisdictionUK Non-devolved
Citation2014 c. 30


Taxation of Pensions Act 2014

2014 CHAPTER 30

An Act to make provision in connection with the taxation of pensions.

[17th December 2014]

Be it enacted by the Queen's most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:-

S-1 Provision for pension flexibility etc

1 Provision for pension flexibility etc

Schedule 1 has effect. In that Schedule-

Part 1 contains provision about flexibly accessing certain drawdown funds,

Part 2 contains provision about removing certain restrictions relatin g to annuities to which individuals become entitled on or after 6 April 2015,

Part 3 contains provision about authorising one-off pension payments not made through a drawdown fund,

Part 4 contains provision about charging the annual allowance charge, in cases where an individual has flexibly accessed pension rights, on inputs in respect of money purchase arrangements (and some hybrid arrangements) so far as they exceed £10,000 in a tax year,

Part 5 contains further provision in connection with the taxation of pensions,

Part 6 contains provision about the giving of information, and

Part 7 contains provision about overseas pensions.

S-2 Restriction and reduction of tax charges on certain lump sums

2 Restriction and reduction of tax charges on certain lump sums

(1) Chapter 5 of Part 4 of FA 2004 (registered pension schemes: tax charges) is amended as follows.

(2) In section 206(1) (special lump sum death benefits charge arises where certain lump sums are paid by a registered pension scheme) after "registered pension scheme" insert "in respect of a member who had reached the age of 75 at the date of the member's death".

(3) In section 206(4) (special lump sum death benefits charge: rate of charge) for "55%" substitute "45%".

(4) In section 205A(4) (serious ill-health lump sum charge: rate of charge) for "55%" substitute "45%".

(5) The amendments made by this section apply to lump sums paid on or after 6 April 2015.

S-3 Death of pension scheme member

3 Death of pension scheme member

Schedule 2 has effect.

S-4 Citation, interpretation and consequential amendments

4 Citation, interpretation and consequential amendments

(1) This Act may be cited as the Taxation of Pensions Act 2014.

(2) In this Act-

(a) "FA", followed by a year, means the Finance Act of that year, and

(b) "ITEPA 2003" means the Income Tax (Earnings and Pensions) Act 2003.

(3) The Commissioners for Her Majesty's Revenue and Customs may by regulations make such amendments of Part 4 of FA 2004, or Part 9 of ITEPA 2003, as the Commissioners consider appropriate in consequence of this Act.

(4) For the purposes of section 282 of FA 2004 and section 1014 of the Income Tax Act 2007 (orders and regulations), the power under subsection (3) of this section is treated as a power under Part 4 of FA 2004 (so that section 282, and not section 1014, applies in relation to regulations made under subsection (3)).

SCHEDULES

SCHEDULE 1

Section 1

Pension flexibility etc

1 Drawdown pensions

Part 1

Drawdown pensions

SCH-1.1

1 In section 165(1) of FA 2004 (the pension rules) in pension rule 5 (annual cap on drawdown pension) after "in each drawdown pension year" insert "from, or under a short-term annuity purchased using sums or assets out of, the member's drawdown pension fund".

SCH-1.2

2 In paragraph 8(1A) of Schedule 28 to FA 2004 (meaning of "member's drawdown pension fund": funds designated as available for drawdown)-

(a) in the opening words omit "they",

(b) in paragraph (a) for "have been designated at any time" substitute "they have, at any time before 6 April 2015, been designated",

(c)before the "or" at the end of paragraph (a) insert-
"(aa) they have, at any time on or after 6 April 2015, been designated under the arrangement as available for the payment of drawdown pension, and-

(i) sums or assets held for the purposes of the arrangement have, at any time before 6 April 2015, been designated under the arrangement as so available, and

(ii) section 165(3A) did not apply to the arrangement immediately before 6 April 2015,", and

(d)in paragraph (b)-

(i) at the beginning insert "they", and

(ii) for "sums or assets which have been so designated or" substitute "member-designated funds under paragraph (a) or (aa) or from sums or assets".

SCH-1.3

3

(1) In Schedule 28 to FA 2004 after paragraph 8 insert-

"Member's flexi-access drawdown fund

8A

8A(1) For the purposes of this Part the member's flexi-access drawdown fund in respect of an arrangement consists of such of the sums or assets held for the purposes of the arrangement as are newly-designated funds.

(2) For the purposes of this Part sums or assets held for the purposes of an arrangement are newly-designated funds if-

(a)they-

(i) have, at any time on or after 6 April 2015, been designated under the arrangement as available for the payment of drawdown pension, and

(ii) are not member-designated funds, or

(b) they were member-designated funds immediately before 6 April 2015 and section 165(3A) applied to the arrangement at that time, or

(c) they have become newly-designated funds by the operation of paragraph 8B, 8C or 8D, or

(d) they arise, or (directly or indirectly) derive, from newly-designated funds under paragraph (a), (b) or (c) or from sums or assets which so arise or derive.

(3) Any sums or assets that become newly-designated funds under sub-paragraph (2)(b) cease to be member-designated funds as from the start of 6 April 2015.

Conversion of certain drawdown pension funds into flexi-access drawdown funds

8B

8B(1) Sub-paragraph (2) applies if-

(a) a member's drawdown pension fund in respect of an arrangement came into being before 6 April 2015,

(b) section 165(3A) did not apply to the arrangement immediately before 6 April 2015, and

(c)at a time on or after 6 April 2015, a payment-

(i) of income withdrawal from the fund, or

(ii) of a short-term annuity purchased using sums or assets out of the fund,

is made that (apart from sub-paragraph (2)) would breach the cap.

(2) The sums and assets that make up the fund immediately before the payment is made become newly-designated funds immediately before the payment is made (so that the payment is made out of the member's flexi-access drawdown fund in respect of the arrangement and therefore is not part of the total capped by pension rule 5).

(3) For the purposes of sub-paragraph (1)(c), a payment of drawdown pension in respect of an arrangement is one that would breach the cap if, when its amount is added to the amounts of any drawdown pension in respect of the arrangement-

(a)paid-

(i) before it is made, but

(ii) in the same drawdown pension year in respect of the arrangement, or

(b) paid at the time it is made,

the total is greater than the cap set by pension rule 5 for that drawdown pension year.

8C

(1) Sub-paragraph (2) applies if-

(a) a member's drawdown pension fund in respect of an arrangement came into being before 6 April 2015,

(b) section 165(3A) did not apply to the arrangement immediately before 6 April 2015, and

(c) the member notifies the scheme administrator that the member wishes the fund to become the member's flexi-access drawdown fund in respect of the arrangement.

(2) At-

(a) the time the scheme administrator accepts the notification, or

(b) the start of 6 April 2015 if that is later,

the sums and assets that then make up that fund become newly-designated funds, if they have not previously done so by the operation of paragraph 8B.

8D

(1) Sub-paragraphs (2) and (3) apply if-

(a) there is a recognised transfer from one registered pension scheme ("the old scheme") to another registered pension scheme ("the new scheme") of member-designated funds held for the purposes of an arrangement under the old scheme, and

(b) the sums or assets transferred are, under the arrangement under the new scheme for whose purposes they are first held after the transfer, designated as available for the payment of drawdown pension.

(2) If the member, when or before making the designation, notifies the scheme administrator of the new scheme that the member wishes the sums or assets to be newly-designated funds, the sums or assets become newly-designated funds and do so-

(a) when the designation is made, or

(b) if later, immediately after the transfer,

except that, if both the designation and transfer are made before 6 April 2015, the sums or assets become newly-designated funds at the start of 6 April 2015.

(3) If sub-paragraph (2) does not provide for the sums or assets to become newly-designated funds, the sums or assets become member-designated funds and do so-

(a) when the designation is made, or

(b) if later, immediately after the transfer."

(2) Sub-paragraph (1), so far as it inserts the new paragraph 8D, has effect in relation to-

(a) cases where both the designation and transfer are made after the end of 2 months beginning with the day on which this Act is passed, and

(b) cases not within paragraph (a) where-

(i) the transfer is made before 6 April 2015 and the designation is made on or after 6 April 2015, or

(ii) the designation is made before 6 April 2015 and the transfer is made on or after 6 April 2015.

SCH-1.4

4

(1) In Schedule 28 to FA 2004 after paragraph 22 insert-

"Dependant's flexi-access drawdown fund

22A

22A(1) For the purposes of this Part a dependant's flexi-access drawdown fund in respect of an arrangement consists of such of the sums or assets held for the purposes of the...

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