Amendment proposed (this day): 1 to the schedule, page 11, line 3, at end insert—

(2A) A lump sum death benefit is also a flexi-access drawdown fund lump sum death benefit if—

(a) it is paid on the death of a nominee of the member,

(b) it is paid in respect of nominees’ income withdrawal to which the nominee was at the date of the nominee’s death entitled to be paid from the nominee’s flexi-access drawdown fund in respect of an arrangement relating to the member, and

(c) it is not a charity lump sum death benefit.

(2B) A lump sum death benefit is also a flexi-access drawdown fund lump sum death benefit if—

(a) it is paid on the death of a successor of the member,

(b) it is paid in respect of successors’ income withdrawal to which the successor was at the date of the successor’s death entitled to be paid from the successor’s flexi-access drawdown fund in respect of an arrangement relating to the member, and

(c) it is not a charity lump sum death benefit.” —(Mr Gauke.)

This amendment, and amendment 2, ensure that unused funds in the drawdown fund of a deceased beneficiary, who was not a dependant of the member, can be paid out as a lump sum death benefit.

Question again proposed, That the amendment be made.

I remind the Committee that with this we are discussing the following:

Government amendments 2 to 12.

Government new clause 1—Death of pension scheme member.

Government new schedule 1—Death of pension scheme member.

It is good to see you in your place this afternoon, Mr Weir. I know that you will keep us all in order.

Returning to the theme that I was developing in our discussions on this part of the Bill, I refer again to the Government consultation “Freedom and choice in pensions”, already a much-quoted document today. I remind the Committee that it stated that the Government wanted to allow for the development of “new, more flexible, annuities”, enabling

“providers to create new types of annuities that more closely meet consumer needs, as well as creating products through the drawdown rules.”

Potentially, that includes allowing annuities to decrease as well as to increase, raising the possibility that individuals could be sold annuities that offer attractive initial rates that decline in subsequent years, possibly at the point at which the state pension kicks in. I do not want to repeat my earlier comments about people’s ability to plan for the long term, but obviously such potential could be a good thing, so that people may access funds at a time when they most need them and have the taper over the years. Again, however, people have to make those decisions consciously, rather than finding that there are unintended consequences.

The schedule makes provision for a new type of authorised payment. We have already heard about the uncrystallised funds pension lump sum, or UFPLS—the Minister coined the phrase and, try as I might, I could not come up with a better acronym. I was trying everything to avoid anything sounding like “flumps”, so the Minister has done well with his UFPLS.

As we have heard, those payments enable members to take lump sums directly from their pensions without first designating them for draw-down. Members will be able to take 25% of each payment tax free, with the rest taxed at the marginal rate. Payment of an uncrystallised funds pension lump sum will trigger the new annual allowance rules. The schedule also makes changes to the provision of information regulations to provide for the passing on of information to scheme administrators and members when individuals have flexible access to pension savings to enable the correct operation of the money purchase annual allowance rules.

One of the issues that I wanted to raise with the Minister was to do with the reporting requirements. The guidance to the Bill indicates that those who fail to contact all the providers within a month risk a penalty of up to £300 initially and then up to £60 a day until that information is passed on. Some concerns have been expressed by the pensions industry about the reporting requirements in the Bill.

To be clear about what the legislation sets out, scheme members who flexibly access their pensions after 6 April 2015 will within 31 days receive a statement from the scheme administrator confirming that they have done so. They will then, as I understand it, be required to inform the administrators of all other schemes of which they are a member, as their annual allowance for money purchase arrangements will be reduced to £10,000. That has to be done within 31 days.

The guidance sets out the possible penalties. We have had some comment in the written evidence to the Committee, in particular the Talbot and Muir evidence. Its head of technical support described the new rules as harsh and unworkable. Elsewhere, the technical resources manager of A J Bell went into more detail, analysing the reasons behind the impact of the new reporting requirements:

“The reason for all this is so that, if an individual pays more than £10,000 to any money purchase scheme in a tax year at a later date, that money purchase scheme knows that it will have to issue a statement to that member about the level of their savings”.

He continued:

“The issue with this is that the Government’s own analysis shows that only 2 per cent of over 55s pay in more than £10,000 a year. So all of the information is being shared just in case the individual is one of the 2 per cent of over 55s who might benefit from a greater than £10,000 savings statement at a later date.”

There seems to be a bit of irony in that. Although some are reporting the requirements as too onerous, perhaps some others would be generally playing down the risk of tax avoidance. We are trying to ensure that the Bill gets the right balance in that process.

In Ros Altmann’s written evidence to the Committee, she went into further detail as to why she believes that the new reporting requirements are unfair and unworkable. She said:

“This new aspect of the Taxation of Pensions Bill is impractical and will disadvantage many customers. To insist on people notifying all past pension schemes that they have taken some money under flexible access would place an impossible or unreasonable burden on too many people. The fines they would face are also draconian. Many may have only a small sum in an old pension scheme they have lost track of.”

Leaving aside the bureaucracy of the new arrangements and the extent to which that is or is not justified, her final point is of particular interest; she appears to believe that the reporting requirements will apply to all pension schemes, whether they are being paid into or not. It is difficult for some to keep track of personal finance and correspondence. We all probably know exactly which pension schemes we are paying into, but people who have moved employment or changed their circumstances may overlook something or find that there is a particular problem.

Ros Altmann states that the new reporting requirements will disproportionately penalise those on more modest incomes. That is a cause for concern. She said that

“those who are better off (and most likely to be able to afford £10,000 a year extra contributions) are likely to have a financial adviser who helps them with this task, whereas in practice most people with moderate savings do not. These are the people most likely to have untraced pension accounts, or to struggle to find details of how to inform their other pension providers.”

All in all, it sounds as if the reporting requirements and the fines accompanying them are further elements of the Bill that may have to be covered in more detail and guidance. I am sure that the Minister wants to respond to those points and to give clarification on the point of detail that has been raised by some in the industry: do the requirements apply to dormant pension schemes—those that are no longer being paid into? Ros Altmann seemed to imply in her contribution that the provisions may need to be amended, as she argued that

“people should only be required to notify new schemes which they establish, or other pension schemes into which they are currently actively contributing (contributions made within the past 24 months perhaps).”

It would be helpful if the Minister could clarify that.

I will briefly turn to the Government amendments to the schedule, which the Minister introduced. New schedule 1 deals with the issue of persons other than dependants being able to inherit unused drawdown funds in cases of deaths before the age of 75. Lump sum death benefits and flexi-access drawdown pensions from those funds can be paid tax free, subject, for example, to the member having sufficient lifetime allowance. That is broadly in line with what the Government proposed when they introduced the Bill. A concern I had at that time—I did, in fact, write to the Minister and received a reply this morning—was the number of pension funds that would be covered by the removal of the 55% rate of tax on pension funds at death. I asked for some more detail of the changes. The Minister has of course tabled some  relevant amendments, but I would like clarity on why an article on the Government’s website about the uncrystallised pension funds drawdown arrangements states quite clearly:

“This does not apply to annuities”.

Some people have suggested that that is not strictly accurate and that the new system will apply to certain forms of annuity; indeed, I raised that point on Second Reading. It would be helpful if the Minister could give us some information, given that the website remains unchanged since that article went live a couple of months ago.

Another issue that I referred to on Second Reading is the fact that a number of people have expressed concerns about the tax avoidance reforms in the schedule. This morning, I referred to the Government’s document, “Removing the requirement to annuitise by age 75”, which outlined the five key principles of pension tax reform, one of which is:

“Any changes to the pensions tax rules should not incur Exchequer cost and should not create any opportunities for tax avoidance.”

I would like to hear some assurance on that.

On reducing the withdrawal tax rate, the Government’s policy costings document states:

“By allowing individuals to flexibly withdraw from their pension pot, this measure results in increased income tax receipts in each year until 2030. After that, a small reduction in tax receipts of around £300 million a year is expected in steady state. This is small in comparison to the impact of all the government changes on pensions, designed to ensure pensions provision is sustainable with an aging population…which means by 2030 the government is saving around £17 billion a year in 2013-14 terms compared to previous policy.”

The Minister has referred to those figures, but they have been disputed, so it is important that he provides some clarity for the record. It has been suggested that the figures seem to be predicated on the assumption that the tax take in the earlier years will be higher because consumer awareness of the tax implications will be low. If that is the case, that is worrying in terms of what has been said about guidance.

Tom McPhail, head of pensions research at Hargreaves Lansdown, said:

“While we support the basic principles behind the government’s reforms, the speed and complexity of these changes mean that a lot of investors are going to be paying unnecessarily large amounts of tax to the government. The Chancellor has effectively engineered a tax windfall for the government from unsuspecting pension investors.”

I am sure that the Minister will want to clarify that point, because when he was asked about the impact earlier, it certainly did not appear to be his intention to create a windfall for the Exchequer. I look forward to hearing what he has to say about that.

Another issue is where potential leakage through tax avoidance fits into things. Concerns have been expressed that the increase in flexibility will enable higher earners to make greater use of the tax advantage status of pensions by giving people the opportunity to pay their salary into a pension rather than taking it directly, meaning that the element of earnings income is tax free when paid in and that 25% of the amount can also be taken as a tax-free lump sum. Again, the Minister did seek to deal with some of those issues when he spoke, but given the number of people who have expressed such concerns, it is important to have them clarified for  the record. Increased flexibility may make such options more attractive for those who can afford to receive less of a salary as they approach retirement. It is important to ensure that what the Government intend the tax rules to do actually happens in practice.

The Government said that the new rules would

“ensure that individuals do not use the new flexibilities, which are intended to provide people with greater access to their retirement savings, to avoid tax on their current earnings by diverting their salary into their pension with tax relief, and then immediately withdrawing 25% tax-free.”

That is what the Government are trying to do.

“Those who choose to draw down more than their tax-free lump sum from a defined contribution pension will be able to benefit from further tax-relieved pension saving, and make further tax-free contributions to a defined contribution pension of up to £10,000 per year. This covers 98% of pension savers over the age of 55.”

I understand the shadow Minister’s concerns, but she must at least put it on the record that she welcomes the Government’s reduction in the lifetime allowance for pensions, and the reduction of the amount that people can put into their pension and obtain tax relief on from an amazing £255,000 to £40,000.

I am glad that the hon. Gentleman understands why I am putting those points on the record and why I seek the Minister’s response. It is not simply my opinion; I am pulling together concerns that other hon. Members and people in the industry have raised.

Mr John Greenwood noted in his written submission, which took up some time during our evidence session and was debated during the passage of the Pension Schemes Bill, that the Government do not appear to have taken account of the potential loss of national insurance, which, in his view, is

“a far greater risk to the Treasury” than the potential loss of income. He also argued that the Government did not spot the potential loophole when they introduced the changes.

He went on to say that “the £10,000 annual allowance” is

“only a deterrent to 2% of the population.”

He was pretty trenchant in his view, notwithstanding the comments from Ministers that the potential for tax avoidance could entirely wipe out the projected increase to Exchequer revenues arising from the Bill.

I pressed the Minister on that point when he gave evidence, and he was concerned that the figure that Mr Greenwood suggested was too large. The measures he is introducing today will hopefully address that issue. Does my hon. Friend believe that the measures are sufficient to close the loophole, or do we need more information?

My hon. Friend made a powerful point when he pressed the Minister in the previous sitting. I do not doubt that the Minister genuinely  wants to assure us that he will do everything he can to avoid leakage or tax avoidance. I am quoting in some detail the figures and arguments submitted by Mr Greenwood to ensure that the Minister has the opportunity, after having reflected on what was said previously in Committee, to give us those assurances and outline what can be done if there are unintended consequences. Without straying into the arguments about the new clause that we will discuss later, which will ask Treasury Ministers to publish more financial information, I want to ensure that we get as much information as possible now.

Mr Greenwood argued that

“even if the risk to the Treasury is half my figure, and I am yet to hear anyone suggest this to be the case, then a 10 per cent take-up would still amount to £1bn loss in 2015/16, more than wiping out the £320 gain predicted by the Budget.”

On the subject of national insurance, he claimed:

“The freedom to access pots entirely once an individual reaches age 55, creates an opportunity for anyone over that age to avoid liability for both employer and employee National Insurance, as well as income tax.”

He expressed surprise that nobody has

“published figures attempting to quantify the loss of NI and tax through this policy.”

I am sure that the Minister has done that work. I am sure that the Treasury has done that analysis and that all the loopholes and issues have been considered, brought together and presented to Ministers before the policy is taken forward. However, we have not seen that and we do not know the finer detail. It would be helpful to know it.

I also understand that Mr Greenwood’s written submission highlights the fact that he made a freedom of information request so that he could consider the costings and assumptions used in the formulation of the policy. However, he was not able to receive that information under FOI because the Treasury cited public interest in declining to release further details. I am sure that the Minister will want to explain why that decision was taken.

I will understand if the Minister says that he does not want to publish anything that would suggest how people could avoid tax. That would be an understandable argument. None the less, there is still enough concern about this issue to require more information from the Government.

I will again quote Ros Altmann who has largely been a champion of the reforms. It is fair to say that she has no axe to grind. She has considered and weighed up the proposals. She is similarly sceptical about the efficacy of that £10,000 money-purchase allowance. She says in her written evidence:

“If the Government is concerned about tax leakage, it should consider tightening the rules around pension recycling, so that those contributing to pension funds after taking any money from their pensions, whether tax free lump sum or flexible access, should have genuine pension-related, rather than tax-related, reasons for further pension contributions.”

That is an interesting concept in relation to the purpose of the measures. The purpose of saving into a pension scheme is to provide for retirement and the longer term, not to access tax-free money at various stages to do whatever one wants. It is about getting a balance and I am interested to hear the Minister’s view on that.

The Minister said in his written correspondence to the Committee and in evidence last week that he does not recognise Mr Greenwood’s figures. If he does not  recognise them, I assume there are others that he does. I understand why he might find it difficult to share some of them, but it would help us to understand the basis of his assumptions.

The Minister will be relieved to know that I will not spend all afternoon highlighting concerns raised by others. However, I want to return to the document I mentioned earlier, which covers the Government’s consultation in July 2010 on the removal of the requirement to annuitise. In the section entitled “Principles for a new tax framework for retirement”, the document states:

“On death, pension savings that have been accumulated with tax relief should be taxed at an appropriate rate to recover past relief given, unless they are used to provide a pension for a dependant.”

I wonder how the measures in the schedule fit with that principle. According to the explanatory memorandum, for deaths before the age of 75, lump sum death benefits and flexi-access drawdown pensions from these funds can be paid tax-free, subject, for example, to the member having a sufficient lifetime allowance.

It has been suggested that those two issues do not entirely fit together. We are looking for absolute assurances from the Minister that at no point would anyone be able to benefit twice from tax relief. That is what the principles outlined in July 2010 sought to prevent.

I do not have much more to say on the specifics of the amendments. As we heard from the Minister, amendments 1 to 8 provide for the treatment of unused funds in the drawdown fund of a deceased beneficiary who is not a dependant of the member. In other words, they deal with the situation where a non-dependant who has inherited unused pension funds dies. The Minister has given us an indication of why he has tabled those particular amendments.

Amendments 9 to 12 deal with payments by a non-UK pension scheme during a person’s period of temporary non-residence. In particular, part 7 of the schedule includes provisions relating to overseas pensions and, again, my understanding is that that is simply to ensure that compatibility is maintained with the UK registered pensions tax regime.

Essentially, amendments 9 to 12

“ensure that payments by a non-UK pension scheme during a person’s period of temporary non-residence that correspond to income withdrawals from a drawdown fund under a registered pension scheme are treated as arising when the person returns to the UK.”

It would be helpful if the Minister gave us some assurances about the scope of that particular amendment, and I look forward to his response.

It is a great pleasure, Mr Weir, to serve under your chairmanship this afternoon. Let me see if I can address the hon. Lady’s questions. First, she raised the reporting requirements that will apply and the concerns that they might be unworkable and lead to fines. There is a new requirement on individuals to tell their pension provider if they have accessed a pension flexibly, which is to ensure that individuals do not use the new system to gain a tax advantage that is not intended. Indeed, as a general point, it strikes me that we are seeking to find the right balance between allowing a system that works and ensuring that the tax advantages that exist with  pensions tax relief are not misused. Sometimes judgments can be quite finely balanced in that area, but this example of a requirement for people to report is an attempt to address a potential unintended tax advantage.

Will the Minister explain to the Committee what sanctions will be taken against people who do not report to their pension provider and/or Her Majesty’s Revenue and Customs?

The sanction available is fines, but let me say a bit more and put that in some of context. The Government are keen to work with industry and consumer groups, which will ensure that the requirements are proportionate and we will consider that issue further. The reporting requirements are designed to help individuals who have flexibly accessed their pension to understand the tax consequences of future pension savings that they can pay in tax charges due. We expect individuals to take reasonable care to ensure that they comply with the new requirements. Where an individual has, for example, forgotten that many years ago they were a member of a particular scheme, providing they have taken reasonable care, it is unlikely that HMRC would impose any penalties if they did not inform their provider that they have flexibly accessed their savings. Under the new flexibilities, we will not normally seek to impose the maximum penalty of £300 on individuals unless the failure is deliberate.

As with all legislation, we want to ensure that the Bill meets its purpose without imposing unnecessary burdens. Therefore, the Government will continue to talk with the pension industry, but if we believe it is right, we will make appropriate changes. We believe that the measure strikes the right balance at the moment, but we take an entirely practical and pragmatic approach to evidence that might emerge in future.

I have a very minor point. Obviously it is a short time until this process starts and it may be more likely that people at the front end of it will be the ones to perhaps be caught out if information is not made available and publicised widely in the public domain. Does the Minister have any plans to do that? Does he have plans for any other publications about this before the scheme is implemented?

Let me first make the general point that we believe that this strikes the right balance. However, we are also prepared to listen to the evidence, the industry and consumer groups. As I outlined to the Committee, HMRC will also take a pragmatic approach to enforcement in this area, which is very important. The focus of the fines is very much on dealing with the deliberate defaulter or the person who seeks a tax advantage in a deliberate way in terms of the maximum penalty of £300. It will be necessary to ensure that individuals are properly informed of the new regime. Schemes need to tell their members when they become subject to the £10,000 allowance. Indeed, that is part of the Bill and the schemes will have a responsibility to ensure that people are aware of that.

The question of whether the changes are a ploy to bring forward revenue is familiar. The answer is that these reforms are about giving people more choice when they retire, not about raising revenue. The Government believe that people who have worked hard all their lives should have the freedom to decide how they use their savings. The costing of the reform was certified by the Office for Budget Responsibility and published alongside the Budget. I can run through the numbers for the next few years in terms of revenue raised. Revenue will be raised but it is very much incidental to the wider change to our pensions tax system that we believe is the right way forward.

The Government recognise the long-term fiscal sustainability challenge and we have taken substantial steps since 2010 to improve the long-term sustainability of the public finances, including reform of public sector pensions and increasing the state retirement age. We have done a lot in this area and we do not believe that our reforms will undermine that. Indeed, we think that the revenue effects are unlikely to be particularly significant overall, in the context of everything else that we have done. The overall revenue effects will, of course, depend upon people’s behavioural responses. We will make any updates as and when appropriate.

On the potential recycling of the avoidance issue, I make the same point that I have made before: we will set out details of the policy changes we have announced since the March Budget in the autumn statement, certified by the Office for Budget Responsibility in the normal way. We believe that that is the right way forward. It is best to wait until the OBR has had the opportunity to review those numbers in the context of a fiscal event such as the autumn statement.

There is a balance to get right. We talked this morning about the changing nature of the work force, and we do not want to be in a position—particularly in the context of auto-enrolment—whereby someone who accesses their pension pot flexibly is then locked out from the pension system altogether. That would be undesirable. We believe that the £10,000 annual allowance sets the right balance but, as I made clear, we would need to review that decision if we found evidence to the contrary. However, we think that that is the appropriate approach to allow the majority of people the flexibility to withdraw or contribute to their pension as they choose, while ensuring that individuals do not use the flexibilities to avoid paying tax on their current earnings.

Under the current system, individuals in flexible drawdown have an annual allowance of zero, but that relates to a relatively small number of people. Under the new system, anyone can enter drawdown, so this approach would be disproportionate and disadvantage savers. It is right that we reform this area. We want to encourage pension saving, particularly in the context of automatic enrolment. We will closely monitor behaviour under the new system. If it becomes clear that the new system is being abused, we will not hesitate to take further action.

HMRC takes a great deal of action to address tax avoidance. On 5 November this year, HMRC issued a list of the 10 things that a tax avoidance scheme promoter will not always tell someone. The list sets out the risks that people face when they sign up to a tax avoidance  scheme, including possible monetary costs, reputational damage, and, in some cases, a criminal conviction. We will continue to take action in that area.

The hon. Member for Kilmarnock and Loudoun drew attention to the evidence provided by John Greenwood to the Pension Schemes Bill. He identified significant sums. As the hon. Lady made clear, they are not numbers that we recognise, but some of the assumptions that he used in reaching a very large number required everyone between the age of 55 and state pension age—5 million people—to be employed and taking advantage of the option to sacrifice salary into a defined contribution scheme. Each individual would reduce their salary significantly and the employer would pay the rest of their salary into their pension.

Each individual would pay an entire year’s worth of sacrificed salary into their pension. It would be paid monthly, but they would live off their reduced salary for a whole year before accessing their salary as a lump sum after the end of that year. It was also assumed that the individuals would have enough annual allowance left to do that on top of their employer’s current contributions. It is a very unlikely set of assumptions. As the hon. Lady knows, I wrote to the Chairs of the Pension Schemes Bill Committee. Copies have been circulated to members of this Committee explaining why we do not recognise those numbers, but I am grateful to have the chance to put that on the record.

Notwithstanding everything the Minister has said, is there a loophole by which people can avoid paying tax? Will tax be avoided through the recycling method, or are the measures he is putting in place enough to prevent that?

One has to be careful what one means by tax avoidance in this case. We can probably agree that recycling is an artificial, contrived arrangement, as opposed to a situation in which somebody has drawn down flexibly and proceeds to make further contributions. We will keep the matter under review. Our desire is to prevent a significant loss to the Exchequer. We do not want the provisions to be exploited by widely marketed schemes that make use of that particular arrangement, and we believe we have got the balance right. The benefits of engaging in such contrived arrangements are restricted, so the appeal of making use of them in an industrialised, widespread and widely marketed way is severely diminished. I repeat the point that, if we find evidence to the contrary, we would need to come back to the matter.

Has the Minister considered whether future pension allowances after drawdown should be connected to employment only, or will they be available to anybody who has the cash to put into a scheme?

We have no further plans to make restrictions in this area. Perhaps outside this meeting, I would happily have a conversation with the hon. Gentleman and hear further the thoughts he has—I do not know whether he has a particular mischief in mind—but we are always seeking ways to address artificial and contrived behaviour in the tax system.

I will just pick up a few other points raised by the hon. Member for Kilmarnock and Loudoun. First, there is the point about the different regime for those aged 75 and over, as opposed to those under 75. The age of 75 is a feature of the existing pensions tax system. It is the age at which individuals stop receiving tax relief on pension contributions, and at which most people will bring their pension into payment. Individuals who die under the age of 75 with untouched pension funds are already able to pass them on to anyone tax-free. The changes simply extend the tax treatment to those under 75 who have money in a drawdown account. The primary purpose of pensions is for people’s retirement, but if someone dies before they get to use their pension for that purpose, beneficiaries should be able to have those funds. However, we do not want pensions to become a vehicle for inheritance tax planning, so once someone is 75 they will be able to pass the funds on to others in a flexi-access drawdown account, but they will need to pay their marginal rate of tax on them. That is the sensible approach.

As for questions about the death charge and its application to annuities, the changes do not apply to annuity income in general. There is a lump-sum death benefit provided in relation to annuities. That will be treated in the same way as other lump-sum death benefits—that is called the annuity protection lump-sum death benefit. I will let the hon. Lady come up with an appropriate acronym for that.

I was asked about the thinking behind the temporary non-resident’s rule and why there is a de minimis of £100,000. We have extended the temporary non-resident’s rule on pension income from April 2015. Previously, it applied only to those in flexible drawdown, who were required to prove that they had secured a minimum income of £20,000 in retirement, and so in most cases had no need to make further provision for their retirement. In the new system, everyone will be able to access their pension flexibly. The Government believe that setting a de minimis of £100,000 is the appropriate level to focus the anti-avoidance rule on those who purposefully move abroad to avoid income tax on large withdrawals from their pension savings. However, the Government will closely monitor behaviour under the new system and will reconsider the level of the de minimis if necessary.

I hope those points of information, clarification and explanation are of assistance to the Committee and that, having made them, the schedule, amendments, new clause and new schedule can stand part of the Bill.

Amendment 1 agreed to.

Amendments made: 2, in schedule, page 11, line 5, leave out “or (2)” and insert “, (2), (2A) or (2B)”

See explanatory statement to amendment 1.

Amendment 3, in schedule, page 11, line 10, leave out “or dependant’s” and insert “, dependant’s, nominee’s or successor’s”

This amendment ensures that the maximum lump sum death benefit that can be paid from a non-dependant beneficiary’s drawdown fund is equal to the value of the investments representing the funds that were unused immediately before the beneficiary’s death.

Amendment 4, in schedule, page 35, line 3, at end insert—

“(da) a payment of nominees’ drawdown pension,

(db) paid to purchase a nominees’ short-term annuity,

(dc) a payment of successors’ drawdown pension,

(dd) paid to purchase a successors’ short-term annuity,”

This amendment extends the circumstances when pension schemes can pay benefits that are authorised payments for tax purposes but are not permitted under their scheme rules. It adds drawdown pensions paid to non-dependant beneficiaries.

Amendment 5, in schedule, page 35, line 38, at end insert—

“(ba) any nominees’ income withdrawal paid to the person from a nominee’s flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(bb) any successors’ income withdrawal paid to the person from a successor’s flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,”

This amendment, and amendments 6, 7 and 8, ensure that income withdrawals made from a non-dependant beneficiary’s drawdown fund under a registered pension scheme when the beneficiary was temporarily non-resident are treated as accruing when the person returns to the UK.

Amendment 6, in schedule, page 35, line 46, at end insert—

“(da) any payment to the person of a nominees’ short-term annuity purchased using sums or assets out of a nominee’s flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(db) any payment to the person of a successors’ short-term annuity purchased using sums or assets out of a successor’s flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,”

See the explanatory statement to amendment 5.

Amendment 7, in schedule, page 37, line 22, at end insert—

“(ba) any nominees’ income withdrawal paid to the person from a nominee’s flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(bb) any successors’ income withdrawal paid to the person from a successor’s flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,”

See the explanatory statement to amendment 5.

Amendment 8, in schedule, page 37, line 30, at end insert—

“(da) any payment to the person of a nominees’ short-term annuity purchased using sums or assets out of a nominee’s flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,

(db) any payment to the person of a successors’ short-term annuity purchased using sums or assets out of a successor’s flexi-access drawdown fund in respect of an arrangement relating to the person under a registered pension scheme,”

See the explanatory statement to amendment 5.

Amendment 9, in schedule, page 39, line 16, at end insert—

“(ba) is paid to the person in respect of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be nominees’ income withdrawal (within the meaning of paragraph 27D of Schedule 28 to FA 2004) paid to the person from the person’s nominee’s flexi-access drawdown fund in respect of the arrangement,

(bb) is paid to the person in respect of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be  successors’ income withdrawal (within the meaning of paragraph 27J of Schedule 28 to FA 2004) paid to the person from the person’s successor’s flexi-access drawdown fund in respect of the arrangement,”

This amendment, and amendments 10, 11 and 12, ensure that payments by a non-UK pension scheme during a person’s period of temporary non-residence that correspond to income withdrawals from a drawdown fund under a registered pension scheme are treated as arising when the person returns to the UK.

Amendment 10, in schedule, page 39, line 32, at end insert—

“(da) is a payment to the person of an annuity purchased using sums or assets held for the purposes of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be a payment of a nominees’ short-term annuity (within the meaning of paragraph 27C of Schedule 28 to FA 2004) purchased using sums or assets out of the person’s nominee’s flexi-access drawdown fund in respect of the arrangement,

(db) is a payment to the person of an annuity purchased using sums or assets held for the purposes of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be a payment of a successors’ short-term annuity (within the meaning of paragraph 27H of Schedule 28 to FA 2004) purchased using sums or assets out of the person’s successor’s flexi-access drawdown fund in respect of the arrangement,”

See the explanatory statement to amendment 9.

Amendment 11, in schedule, page 41, line 16, at end insert—

“(ba) is paid to the person in respect of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be nominees’ income withdrawal (within the meaning of paragraph 27D of Schedule 28 to FA 2004) paid to the person from the person’s nominee’s flexi-access drawdown fund in respect of the arrangement,

(bb) is paid to the person in respect of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be successors’ income withdrawal (within the meaning of paragraph 27J of Schedule 28 to FA 2004) paid to the person from the person’s successor’s flexi-access drawdown fund in respect of the arrangement,”

See the explanatory statement to amendment 9.

Amendment 12, in schedule, page 41, line 32, at end insert—

“(da) is a payment to the person of an annuity purchased using sums or assets held for the purposes of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be a payment of a nominees’ short-term annuity (within the meaning of paragraph 27C of Schedule 28 to FA 2004) purchased using sums or assets out of the person’s nominee’s flexi-access drawdown fund in respect of the arrangement,

(db) is a payment to the person of an annuity purchased using sums or assets held for the purposes of an arrangement relating to the person under the scheme and would, if the scheme were a registered pension scheme, be a payment of a successors’ short-term annuity (within the meaning of paragraph 27H of Schedule 28 to FA 2004) purchased using sums or assets out of the person’s successor’s flexi-access drawdown fund in respect of the arrangement,”—(Mr Gauke.)

See the explanatory statement to amendment 9.

Schedule, as amended, agreed to.