Introduction Details of the Schedule Part 2 Other provision
19.Paragraph 5 introduces a number of consequential amendments to Part 4 of FA 2004 in connection with the reduction to the lifetime allowance.
20.Paragraph 6(2) inserts new subsections 5BA and 5BB into section 218 of FA 2004. Subsection 5BA provides that where an individual has a lifetime allowance enhancement factor under sections 220, 222, 223 or 224 of FA 2004, (which apply a lifetime enhancement factor in respect of pension credits, relevant overseas individuals and transfers from recognised overseas pension schemes), and a benefit crystallisation event occurs between 6 April 2012 and 5 April 2014, then in calculating the individual’s lifetime allowance the lifetime allowance enhancement factor is multiplied by £1,500,000 if this is greater than the standard lifetime allowance.
21.Subsection 5BB provides the order of precedence where an individual has more than one lifetime allowance enhancement factor.
22.Paragraph 6(3) inserts new subsection 5D into section 218 which provides for the reference to the standard lifetime allowance to be replaced by a figure of £1,500,000 where certain lump sum death benefits are paid (a ‘benefit crystallisation event 7’ occurs) on or after 6 April 2014 in respect the death of the individual in either tax year 2012-13 or 2013-14.
23.Paragraph 7(1) inserts new subsection 5A into section 219. Subsection 5A provides that where an individual has primary protection, when calculating the availability of the individual’s lifetime allowance, if a benefit crystallisation event has previously occurred and a further benefit crystallisation event occurs on or after 6 April 2014, then for the purpose of calculating the adjustment of the relevant untaxed amount, reference to the current standard lifetime allowance is replaced by £1,500,000 where this is greater. This ensures that those with primary protection do not benefit from an increase in their available lifetime allowance if the current standard lifetime allowance is less than £1,500,000 when the adjustment is made.
24.Paragraph 8(2) inserts new sub-paragraphs (9) to (11) into paragraph 2 of Schedule 29 to FA 2004. Sub-paragraphs (9) to (11) provide that where an individual has primary protection and/or enhanced protection, and they don’t have any existing lump sum protection, then the maximum pension commencement lump sum they can take will continue to be based on the 2013-14 lifetime allowance of £1,500,000 after the lifetime allowance is reduced to £1,250,000.
25.Paragraph 8(3) provides for the amendments made by paragraph 8(2) to have effect where the individual becomes entitled to the pension commencement lump sum on or after 6 April 2014.
26.Paragraph 8(4) substitutes sub-paragraphs 2 and 3 in paragraph 8 of Schedule 29 to FA 2004 in connection with the calculation of the maximum amount that can be paid as a trivial commutation lump sum where the individual has previously taken some pension benefits. The changes amend the way that any previously taken benefits are adjusted for the purposes of calculating the maximum amount. Prior to this change, the calculation was by reference to any change in the standard lifetime allowance. From 6 April 2014, the calculation is by reference to any change in the trivial commutation limit.
27.Sub-paragraph 2 sets out the formula for the adjustment where the pension benefits were taken before 6 April 2006 and sub-paragraph 3 sets out the formula where the pension benefits were taken on or after 6 April 2006.
28.Paragraph 8(5) provides for the amendments made by paragraph 8(4) to have effect where the nominated date is on or after 6 April 2014.