Schedule 1 Part 2 - Annuities
106.Paragraph 37 inserts new paragraph 3(1A) into Schedule 28 to provide an additional definition of a member’s lifetime annuity where the member became entitled to the annuity on or after 6 April 2015. From this date the annuity must still be payable for life by an insurance company but the annuity can decrease and it can continue to be paid after the member’s death if the member dies before the end of a guarantee period of any length specified in the annuity contract. In addition a member is no longer subject to the unauthorised payments charges if they have not had an opportunity to select the insurance company paying the lifetime annuity. This is subject to new sub-paragraph (2C)(za), see paragraph 44 of Schedule 1.
107.Paragraph 38 inserts new paragraph 6(1ZA) into Schedule 28 to provide an additional definition of a member’s short-term annuity where the member became entitled to the annuity on or after 6 April 2015. From this date the annuity must still be purchased out of a member’s drawdown pension fund or a member’s flexi-access drawdown fund. It must be payable for no more than five years by an insurance company but the annuity can decrease. In addition a member is no longer subject to the unauthorised payments charges if they have not had an opportunity to select the insurance company paying the annuity.
108.Paragraph 39 inserts new paragraph 17(1ZA) into Schedule 28 to provide an additional definition of a dependant’s annuity where the dependant became entitled to the annuity on or after 6 April 2015 or, where it was purchased together with a member’s lifetime annuity, where the member became entitled to that annuity on or after 6 April 2015. From this date the annuity must still be payable by an insurance company and only for the period up to the dependant’s death, marriage or entering a civil partnership (or where the dependant is the member’s child, where they cease to be a dependant), but the annuity can decrease. In addition the dependant is no longer subject to the unauthorised payments charges if they or the member have not had an opportunity to select the insurance company paying the annuity.
109.Paragraph 40 inserts new paragraph 20(1ZA) into Schedule 28 to provide an additional definition of a dependant’s short-term annuity where the dependant became entitled to the annuity on or after 6 April 2015. From this date the annuity must still be purchased out of a dependant’s drawdown pension fund or a dependant’s flexi-access drawdown fund. It must be payable for no more than five years (subject to it ending before the dependant’s death) and payable by an insurance company but the annuity can decrease. In addition a dependant is no longer subject to the unauthorised payments charges if they or the member have not had an opportunity to select the insurance company paying the annuity.
110.Paragraph 41 amends pension rule 2 in section 165(1) of FA 2004 which sets out the types of pension that can be paid to a member as an authorised payment from a registered pension scheme. Where the entitlement to an annuity arises on or after 6 April 2015, paragraph 41 removes the requirement that to be an authorised payment the annuity must not be paid after the member’s death for longer than 10 years after the member became entitled to the annuity. This change reflects the amendment that paragraph 37 of Schedule 1 makes to paragraph 3 of Schedule 28.
111.Paragraph 43 amends paragraph 3(1) of Schedule 28 which defines a member’s lifetime annuity so that this existing definition applies only where the member became entitled to the lifetime annuity before 6 April 2015. Where the entitlement to the annuity arises on or after this date, the definition that applies is in new paragraph 3(1A).
112.Paragraph 44 amends paragraph 3(2C) of Schedule 28 and inserts new sub-paragraph (2E) to extend the scope of paragraph 3(2C) to enable regulations made under paragraph 3(2B) to specify circumstances in which, following the cessation of an annuity and a transfer of funds which are used to purchase a new flexible annuity, the new flexible annuity will not be a lifetime annuity for the purposes of Part 4 of FA 2004.
113.Paragraph 45 amends paragraph 6(1) of Schedule 28 which defines a member’s short-term annuity so that this existing definition applies only where the member became entitled to the annuity before 6 April 2015. Where the entitlement to the annuity arises on or after this date, the definition that applies is in new paragraph 6(1ZA).
114.Paragraph 46 amends paragraph 6(1C) of Schedule 28 and inserts new sub-paragraph (1E) to extend the scope of paragraph 6(1C) to enable regulations made under paragraph 6(1B) to specify circumstances in which, following the cessation of an annuity and a transfer of funds which are used to purchase a short-term annuity, the new annuity will not be a short-term annuity for the purposes of Part 4 of FA 2004.
115.Paragraph 47 amends paragraph 17(1) of Schedule 28 which defines a dependants’ annuity so that this definition applies only where either the dependant became entitled to the annuity before 6 April 2015, or (where it was purchased together with a member’s lifetime annuity) the member became entitled to that annuity before 6 April 2015. Where the entitlement to the annuity arises on or after this date, the definition that applies is in new paragraph 17(1ZA).
116.Paragraph 48 makes a consequential amendment to paragraph 17(1A) of Schedule 28 to provide that as for paragraph 17(1), where the entitlement arises on or after 6 April 2015, a dependants’ annuity is purchased together with a lifetime annuity if the dependants’ annuity is related to the lifetime annuity.
117.Paragraph 49 amends paragraph 17(4) of Schedule 28 and inserts new sub-paragraph (6) to extend the scope of paragraph 17(4) to enable regulations made under paragraph 17(3) to specify circumstances in which, following the cessation of a dependant’s annuity and a transfer of funds which are used to purchase a dependant’s annuity, the new annuity will not be a dependant’s annuity for the purposes of Part 4 of FA 2004.
118.Paragraph 50 amends paragraph 20(1) of Schedule 28 which defines a dependants’ short-term annuity so that this definition applies only where the dependant became entitled to the annuity before 6 April 2015. Where the entitlement to the annuity arises on or after this date, the definition that applies is in new paragraph 20(1ZA).
119.Paragraph 51 amends paragraph 20(1C) of Schedule 28 and inserts new sub-paragraph (1E) to extend the scope of paragraph 20(1C) to enable regulations made under paragraph 20(1B) to specify circumstances in which, following the cessation of a dependant’s short-term annuity and a transfer of funds which are used to purchase dependant’s short-term annuity, the new annuity will not be a dependant’s short-term annuity for the purposes of Part 4 of FA 2004.
120.Paragraph 52 makes consequential changes to paragraphs 87 and 95 of Schedule 16 to FA 2011 so that added references to an annuity purchased out of drawdown pension funds also include a reference to an annuity purchased out of unsecured pension funds. These paragraphs contain transitional provisions in connection with changes introduced from 6 April 2011 to remove the effective requirement to purchase an annuity at age 75 and apply where a member or dependant was entitled to a short-term annuity on that date.