Serious ill-health lump sum meaning

POWER CLAUSE / RULE HELD BY REQUIRES AGREEMENT OR CONSULTATION WITH SUBJECT TO Authority to amend; to wind the scheme up or delay winding-up; to cease future benefit accrual; to shut to new joiners; to readmit employees to membership of the scheme Discretion to set the employer contribution rate; to lower or suspend contributions; to apportion statutory debts Ability to enhance or vary benefits; to permit early retirement pensions and set actuarial reductions; to allow incapacity pensions, decide whether a member meets the incapacity definition, and reduce or pause such pensions; to grant pensions for serious ill-health; to apply actuarial uplifts for late retirement; to fix the rate at which pension is exchanged for a lump sum; to commute trivial pensions; to provide a bridging pension; to award discretionary increases to pensions; to make unauthorised payments Capacity to admit new employers or end their participation; to replace the principal employer; to transfer members’ benefits into or out of the scheme Authority to return...

In this issue: Pensions taxation Funding Scheme governance Daily and weekly news alerts Dates for your diary Trackers Pensions taxation HMRC publishes second lifetime allowance guidance newsletter HMRC has released its Lifetime allowance guidance newsletter for February 2024 which, amongst other points, offers further clarity on pension commencement excess lump sums (PCELS), reporting obligations, and transitional tax‑free amount certificates. In Pension Schemes Newsletter 155 (January 2024), HMRC had previously raised concerns about the operation of PCELS. It has now responded to several of these, confirming that the ‘permitted maximum’ for PCELS will be removed from legislation. As a result, a lump sum will no longer be checked against a member’s remaining lump sum and death benefit allowance to decide whether it can be paid as a PCELS. HMRC also makes clear that to be eligible for a PCELS a member must have used up either their lump sum allowance or their lump sum and death benefit allowance....

If a member is expected to live for less than one year (described as ‘serious ill‑health’), and certain requirements are met, a scheme administrator may commute any pension rights that member holds within the scheme and instead pay the whole benefit due under an arrangement as a lump sum. In statute this type of authorised member payment is termed a serious ill‑health lump sum. Conditions for payment of a serious ill-health lump sum Current conditions Under the Finance Act 2004 (FA 2004), Sch 29, para 4, a scheme administrator can pay a serious ill‑health lump sum to a member only where the following conditions apply: Before payment, the administrator has received evidence from a registered medical practitioner confirming the member is expected to live for less than one year. A ‘registered medical practitioner’ means a person registered under the Medical Act 1983 or, if the seriously ill member is overseas, a person with equivalent overseas qualifications. From 16 September 2016, the payment must...

FORTHCOMING DEVELOPMENT : Section 10 of the Finance Act 2022 will raise the normal minimum pension age (NMPA) from 55 to 57 on 6 April 2028 (excluding members of the firefighters, police and armed forces public service pension schemes). The Finance Act 2022 will also permit members of registered pension schemes to access benefits before 57 where, on or before 4 November 2021, they either held an ‘unqualified right’ to take benefits, or were already undertaking a substantive transfer to a scheme that provided an unqualified right to a protected pension age below 57 on or before 4 November 2021. To rely on this 2028 protection, the scheme’s rules must, as at 11 February 2021, have contained an unqualified right to take entitlement to scheme benefits before age 57. For more detail, see Practice Note: Increasing the normal minimum pension age (NMPA) to 57—pensions impact. Ways of drawing benefits Members of defined benefit (DB) occupational pension schemes can take their benefits in various ways, subject...

THIS PRACTICE NOTE APPLIES ONLY TO OCCUPATIONAL PENSION SCHEMES ARCHIVED: This archived Practice Note reviews the revisions occupational pension schemes adopted to their rules to mirror the pensions tax changes implemented by the Finance Act 2004 from 6 April 2006 (A‑day). It is not updated and is provided for background only. For more detail on the A‑day reforms, see Practice Note: The Finance Act 2004, A‑day and the pensions tax regime [Archived]. A-day-an overview The Finance Act 2004 (FA 2004), effective from A‑day, brought in a new, streamlined framework for taxing UK pension schemes. Before A‑day, schemes had to obtain and keep Inland Revenue (now His Majesty’s Revenue and Customs (HMRC)) exempt approval to secure favourable tax status. To secure and retain that exempt approval, the maximum benefits payable by schemes were constrained by HMRC‑set ceilings (the HMRC Limits). For additional context, see The pre A‑day pensions tax regime [Archived]. The Finance Act 2004 removed the former approval system and, in its place, required pension schemes to...