Winding-up lump sum death benefit meaning

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....

THIS PRACTICE NOTE APPLIES TO MONEY PURCHASE ARRANGEMENTS FROM 6 APRIL 2015 From 6 April 2015, new pension flexibilities expanded the retirement choices for DC members and others with ‘flexible benefits’ (in essence, money purchase and/or cash balance entitlements). As part of those reforms, drawdown became more broadly accessible. For background on the changes implemented on 6 April 2015, see Practice Note: Pension freedoms—an introduction [Archived]. This Practice Note concentrates on the legal framework for drawdown arrangements set up on and after 6 April 2015. It also addresses how pre-April 2015 drawdown is treated from that date. For the rules governing drawdown before 6 April 2015, see Practice Note: Drawdown between 6 April 2011 and 5 April 2015 [Archived]. What is drawdown? The label ‘drawdown pension’ (often called ‘flexible income’) replaced ‘unsecured pension’ and ‘alternatively secured pension’ used up to 5 April 2011. Drawdown pension describes the method of paying benefits that allows members to set their own yearly income from a pension arrangement...

THIS PRACTICE NOTE RELATES TO REGISTERED PENSION SCHEMES By means of Schedule 4 to the Finance Act 2016 (FA 2016), the government brought in an allowance protection regime designed to sit alongside the cut in the lifetime allowance from £1.25m to £1m on 6 April 2016. Termed fixed protection 2016 (FP 2016), it mirrors earlier fixed protection regimes respectively launched on 6 April 2012 (fixed protection 2012, or simply ‘fixed protection’) and 6 April 2014 (fixed protection 2014). This Practice Note focuses on FP 2016, which is the subject of this Practice Note. The original purpose of FP 2016 was to give transitional protection to people who, before 6 April 2014, had already accumulated pension savings above £1m, or who expected to do so on the basis that the lifetime allowance would be maintained at no less than £1.25m. Although the lifetime allowance was removed with effect from 6 April 2024, FP 2016 still delivers limited transitional safeguards regarding an individual’s rights to (i) the lump sum allowance, (ii)...

This Practice Note provides overarching guidance on how tax affects contributions to, and benefits paid from, pension schemes, together with the varieties of pension orders that can be made within financial order proceedings. Specialist advice should be obtained where necessary. Tax concessions Tax incentives on pension contributions encourage individuals and employers to build up future retirement savings...