OpenLegislation

Section 166 Lump sum ruleI1C1

United Kingdom

C2(1)

This is the rule relating to the payment of lump sums by a registered pension scheme to a member of the pension scheme (“the lump sum rule”).

Lump sum rule

No lump sum may be paid other than—

(a)

a pension commencement lump sum,

F1(aa)

a pension commencement excess lump sum,

(b)

a serious ill-health lump sum,

F2(ba)

an uncrystallised funds pension lump sum,

(c)

a short service refund lump sum,

(d)

a refund of excess contributions lump sum,

(e)

a trivial commutation lump sum F3, or

(f)

a winding-up lump sum, F4...

F5(g)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6(h)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C3(2)

For the purposes of this Part, a person becomes entitled to a lump sum under a registered pension scheme—

F7(za)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

C4C5(a)

in the case of F8a pension commencement lump sum or a pension commencement excess lump sum, immediately before the person becomes entitled to the pension in connection with which it is paid F9(or, if the person dies before becoming entitled to the pension in connection with which it was anticipated it would be paid, immediately before death),

F10(aa)

in the case of an uncrystallised funds pension lump sum, immediately before it is paid, and

(b)

in any other case, when the person acquires an actual (rather than a prospective) right to receive the lump sum.

(3)

Part 1 of Schedule 29 gives the meaning of expressions used in the lump sum rule.

(4)

Schedule 36 contains (in Part 3) transitional provisions about lump sums.

F11(5)

The Commissioners for Her Majesty's Revenue and Customs may by regulations amend Part 1 of Schedule 29, or Part 3 of Schedule 36, in connection with cases involving a lump sum within subsection (6).

(6)

A lump sum is within this subsection if—

(a)

the sum is paid on or after 19 September 2013 and before 6 April 2015, or

(b)

the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled.

(7)

The provision that may be made under subsection (5) includes provision altering the effect of amendments made by the Finance Act 2014.

Annotations

Textual amendments

F1

S. 166(1)(aa) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 17(2)(a), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

F2

S. 166(1)(ba) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 54

F3

Word in s. 166(1)(e) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 17(2)(b), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

F4

Word in s. 166(1) omitted (19.3.2014) by virtue of Finance Act 2014 (c. 26), Sch. 5 paras. 5(1), 15

F5

S. 166(1)(g) omitted (for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2024 (c. 3), Sch. 9 paras. 17(2)(c), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

F6

S. 166(1)(h) omitted (for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2024 (c. 3), Sch. 9 paras. 17(2)(c), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

F7

S. 166(2)(za) omitted (for the tax year 2024-25 and subsequent tax years) by virtue of Finance Act 2024 (c. 3), Sch. 9 paras. 17(3)(a), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

F8

Words in s. 166(2)(a) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 17(3)(b), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

F9

Words in s. 166(2)(a) inserted (retrospective to 6.4.2006) by Finance Act 2007 (c. 11), Sch. 20 paras. 9, 24(3)

F10

S. 166(2)(aa) inserted (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 55

F11

S. 166(5)-(7) inserted (19.3.2014) by Finance Act 2014 (c. 26), Sch. 5 paras. 13, 15

Modifications

C1

S. 166 applied (with modifications) (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 11

C2

S. 166(1) modified (6.4.2006) by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), arts. 1(1), 25(1)-(3)

C3

S. 166(2) modified by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), art. 23B (as inserted (1.6.2009) by S.I. 2009/1172, arts. 1, 3)

C4

S. 166(2)(a) modified by S.I. 2006/572, art. 23ZE(2) (as inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Taxation of Pension Schemes (Transitional Provisions) (Amendment) Order 2011 (S.I. 2011/732), arts. 1(1), 3); (as amended (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 25(13))

C5

S. 166(2)(a) modified by S.I. 2006/572, art. 23ZC(2) (as inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Taxation of Pension Schemes (Transitional Provisions) (Amendment) Order 2011 (S.I. 2011/732), arts. 1(1), 3); (as amended (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 25(12))

Commencement

I1

Ss. 160-274, 281, Schs. 30-35 in force at 6.4.2006 but any power to make an order or regulations under those provisions may be exercised at any time after Royal Assent, see s. 284

Notes on Part 4

Modifications

C1

Pt. 4 modified (N.I.) (1.4.2006) by The Firemens Pension Scheme Order (Northern Ireland) 2006 (S.R. 2006/210), arts. 1(2), 103

C2

Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 9, 10

C3

Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 12

C4

Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 13(5)

C5

Pt. 4 modified (6.4.2006) by The Pension Protection Fund (Tax) Regulations 2006 (S.I. 2006/575), regs. 1, 26

C6

Pt. 4 modified (31.12.2007) by Police and Justice Act 2006 (c. 48), s. 53(1), Sch. 3 para. 7; S.I. 2007/3203, art. 3(b)

C7

Pt. 4 modified (1.7.2008) (N.I.) (with effect in accordance with reg. 1 of the amending Rule) by The Health and Social Care (Pension Scheme) Regulations (Northern Ireland) 2008 (S.R. 2008/256), regs. 1, 124(1) (with regs. 134, 258)

C8

Pt. 4 modified by The Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572), reg. 5A (as inserted (6.4.2006) by S.I. 2008/2990, arts. 1(1), 3)

C9

Pt. 4 applied (21.7.2009) by Finance Act 2009 (c. 10), Sch. 35 para. 18

C10

Pt. 4 modified (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(3)

C11

Pt. 4 applied (with modifications) (with application in accordance with Sch. 22 para. 1 of the amending Act) by Finance Act 2013 (c. 29), Sch. 22 para. 1(2)

C12

Pt. 4 modified (17.7.2014) by Finance Act 2014 (c. 26), Sch. 6 para. 1(2)(3)

C13

Pt. 4: power to amend conferred (17.12.2014) by Taxation of Pensions Act 2014 (c. 30), s. 4(3)

C14

Pt. 4 modified (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 1

C15

Pt. 4 modified (15.9.2016) by Finance Act 2016 (c. 24), Sch. 4 para. 9(2)

C16

Pt. 4 modified (with effect in relation to the tax year 2024-25 and subsequent tax years) by The MPs’, Senedd and Assembly Pension Schemes (Tax) Regulations 2025 (S.I. 2025/52), regs. 1(2)(3), 6

C17

Pt. 4 modified (14.7.2026 for the tax year 2014-15 and subsequent tax years) by The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2026 (S.I. 2026/673), regs. 1(2), 10

Notes on Chapter 3

Modifications

C1

Pt. 4 modified (19.7.2011) by Finance Act 2011 (c. 11), Sch. 18 para. 14(3)

C2

Pt. 4 modified (with effect in relation to the tax year 2024-25 and subsequent tax years) by The MPs’, Senedd and Assembly Pension Schemes (Tax) Regulations 2025 (S.I. 2025/52), regs. 1(2)(3), 6