26 July 2006
The Taxation of Pension Schemes (Transitional
Provisions) (Amendment No. 2) Order 2006, which provides
revised rules for the calculation of stand-alone lump sums, has
been published.
The Taxation of Pension Schemes (Transitional Provisions)
(Amendment No. 2) Order 2006 amends articles 25 and 26 of The
Taxation of Pension Schemes (Transitional Provisions) Order 2006
(SI 572/2006). It provides revised rules for the calculation of
stand-alone lump sums. These are lump sums paid under transitional
protection which constitute the whole of a persons rights under the
pension scheme. The order sets out the circumstances in which such
lump sums can be paid and provides rules covering transfers.
This order plugs various loopholes that could allow some
individuals to take much larger tax-free lump sums than the
legislation intends. To prevent the possibility of forestalling its
provisions this order came into force on the 25 July 2006 which was
shortly after it was laid. This Order works in the way that the
original Order was intended to work in line with announced policy,
and will not therefore affect those paying lump sums in normal
circumstances.
HM Revenue & Customs has also published a
Guidance Note on the operation of the revised order.
