Explanatory note

This Order amends the Pension Schemes (Transfers, Reorganisations and Winding Up) (Transitional Provisions) Order 2006 (S.I. 2006/573) (“the 2006 Order”). The 2006 Order extends the transitional protection contained in Schedule 36 of the Finance Act 2004 (c.12) (“FA 2004”) to cover additional pension rights that were acquired before 6 April 2006 (“A-Day”). The pension rights continue to receive transitional protection where those rights are transferred away from the original scheme to another scheme in the context of a scheme reorganisation or winding up. The amendments contained in this Order extend this transitional protection.

Article 1 provides for citation commencement and effect. The Order has retrospective effect back to A-Day. Section 282(A1) of FA 2004 contains the power to make secondary legislation with retrospective effect if the provision does not increase any person’s liability to tax. This Order does not increase any person’s liability to tax.

Article 2 introduces the amendments.

Article 3 extends the definition of the “reorganisation condition” contained in article 10 of the 2006 Order. Protection is extended to cover situations where accrued contracted-out rights and accrued non contracted-out rights are transferred out of the original scheme in two separate transactions either to a new pension scheme or to a new pension scheme and another scheme. Consequential amendments are made to the definitions paragraph of the article.

Article 4 amends the winding up condition contained in article 14 of the 2006 Order. The condition is extended so as to provide transitional protection to a member’s rights under certain registered pension schemes which were receiving transitional protection under paragraph 22 or 31 of Schedule 36 to FA 2004. Paragraph 22 covers pre A-Day rights to take benefits before the “normal minimum pension age” of 55 and paragraph 31 covers pre A-Day rights to take a tax-free retirement lump sum of more than the normal post A-Day limit of 25% of the total value of the retirement benefits coming into payment.

Article 5 amends the “annuity purchase condition” contained in article 15 of the 2006 Order. The amendments extend transitional protection to situations where the member’s rights under a registered pension scheme have been transferred to an annuity policy which has been assigned to the member.

Article 6 inserts a new article 17 into the 2006 Order concerning “stand-alone lump sums” (“SALS”). SALS (lump sums that are paid out with no connected pension) are given transitional protection under the Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572) (as amended by S.I. 2006/2004). Article 17 extends the transitional protection in certain wind-up situations where a member’s right to a stand-alone lump sum is secured by purchasing or assigning an annuity policy to the member.

A full Impact Assessment has not been prepared for this instrument as no impact on the private or voluntary sectors is anticipated.