The Taxation of Pension Schemes (Transitional Provisions) (Amendment No. 2) Order 2006
| Jurisdiction | UK Non-devolved |
| Citation | SI 2006/2004 |
2006 No. 2004
INCOME TAX
The Taxation of Pension Schemes (Transitional Provisions) (Amendment No. 2) Order 2006
Made 24th July 2006
Laid before the House of Commons 24th July 2006
Coming into force 25th July 2006
The Treasury make the following Order in exercise of the powers conferred upon them by section 283(2) of the Finance Act 20041.
Citation, commencement and interpretation
1.—(1) This Order may be cited as the Taxation of Pension Schemes (Transitional Provisions) (Amendment No. 2) Order 2006 and shall come into force on 25th July 2006.
(2) In this Order “the principal Order” means the Taxation of Pension Schemes (Transitional Provisions) Order 20062.
Amendment of the principal Order: general
2. The principal Order is amended as follows.
Substitution of article 25 of the principal Order
3. For article 25 substitute—
“Stand-alone lump sums: introductory and definition
25.—(1) This article and articles 25A to 25D deal with stand-alone lump sums.
(2) In those articles—
this article is introductory and sets out the definition of a stand-alone lump sum;
article 25A deals with the conditions that must be met before a lump sum may be classified as a stand-alone lump sum;
article 25B deals with the circumstances in which a stand-alone lump sum may be paid;
article 25C deals with the tax consequences; and
article 25D contains further provisions.
(3) In this article and in articles 25A to 25D a “stand-alone lump sum” means a lump sum which—
(a)
(a) meets all the conditions A to D set out in article 25A, and
(b)
(b) is paid in one of the circumstances A to C set out in article 25B.
Conditions to be met by stand-alone lump sums
25A.—(1) This article sets out the conditions referred to in article 25(3)(a).
(2) Condition A is that, on or after 6th April 2006, the lump sum is paid to an individual under a registered pension scheme of which the individual is a member.
(3) Condition B is that the lump sum is paid in circumstances where all of the member’s uncrystallised rights under the scheme come into payment on a single benefit crystallisation event.
(4) Condition C is that the lump sum is paid when the member has reached normal minimum pension age (or the ill-health condition is satisfied).
(5) Condition D is that the lump sum is paid before the member reaches the age of 75.
Circumstances in which stand-alone lump sums are paid
25B.—(1) This article sets out the circumstances referred to in article 25(3)(b).
(2) Circumstance A is where paragraph 28 of Schedule 36 (modification of paragraph 2 of Schedule 29 in the case of a member of a pension scheme to whom enhanced protection does not apply) applies in relation to the member.
(3) Circumstance B is where—
(a)
(a) paragraph 29 of Schedule 36 (modification of applicable amount in the case of a member of a pension scheme to whom enhanced protection applies) applies in relation to the member, and
(b)
(b) on 5th April 2006, and on the assumptions set out in paragraph (5), all of the member’s rights under all of the member’s pension schemes within paragraphs (a) to (g) of paragraph 1(1) of Schedule 36 could have been paid out to the member in the form of a lump sum.
(4) Circumstance C is where—
(a)
(a) on 5th April 2006 the member was a member of a pension scheme within paragraphs (a) to (e) of paragraph 1(1) of Schedule 36 and relating to an employment (the “original pension scheme”),
(b)
(b) on 5th April 2006, and on the assumptions set out in paragraph (5), all of the member’s rights under the original pension scheme, and all of the member’s rights under any other pension scheme within paragraphs (a) to (e) of paragraph 1(1) of Schedule 36 and relating to the same employment could have been paid out to the member in the form of a lump sum,
(c)
(c) on and after 6th April 2006, relevant benefit accrual (as defined in paragraph 13 of Schedule 36) has not occurred under the original pension scheme in relation to the member,
(d)
(d) on or after 6th April 2006 the member is paid a lump sum representing all of the member’s rights (to which the member did not have an actual entitlement on or before 5th April 2006) under the original pension scheme,
(e)
(e) the circumstances set out in paragraphs (2) and (3) (circumstances A and B) do not apply.
(5) The assumptions are that—
(a)
(a) the member had retired on 5th April 2006;
(b)
(b) the valuation assumptions apply (modified, if appropriate, in accordance with paragraph 25(7) of Schedule 36); and
(c)
(c) the payment of the lump sum on 5th April 2006 (on the assumptions set out in paragraph 26(4) of Schedule 36) would not have given the Commissioners of Her Majesty’s Revenue and Customs grounds for withdrawing the approval of the pension scheme.
Payment of stand-alone lump sums: tax...
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