Serious ill-health lump sum definition

View the related checklists about Serious ill-health lump sum

Updating your rules to reflect A-day changes—checklist [Archived]

Updating your rules to reflect A-day changes—checklist [Archived] ARCHIVED: This archived Checklist sets out the issues that trustees would have had to consider when updating their scheme rules to reflect the legislative changes that came into force on 6 April 2006 (A-day). It is for background information only. For further information, see Practice Note: Updating your rules to reflect A-day changes [Archived]. A-day—an overview On 6 April 2006, the Finance Act 2004 (FA 2004) came into force introducing a new regime for the taxation of pension schemes in the UK. The key changes were: • the system of tax approval was replaced by registration with HM Revenue & Customs (HMRC) • instead of rigid caps and limits on the benefits that could be provided, a more flexible system was introduced whereby tax charges would be imposed on ‘unauthorised payments’ and where members' benefits exceed the annual and lifetime allowance Transitional provisions To avoid pension scheme liabilities suddenly increasing on the removal of the caps and limits previously in place,...

Retirement options of DC members before 6 April 2015 [Archived]

Retirement options of DC members before 6 April 2015 [Archived] ARCHIVED: This Checklist contains information on retirement options for DC members prior to 6 April 2015. It is not maintained and is for background information only. For more information on retirement options for DC members, see Practice Note: Retirement options—DC members. Pre-6 April 2015 pension payment options Until 5 April 2015, a DC member's pension pot could be used to provide one of the following pension payments: • `a scheme pension—a 'scheme pension' means either a pension paid directly by the scheme administrator from the scheme's own funds or a pension paid by an insurance company selected by the scheme administrator. DC occupational pension schemes and personal pension schemes do not usually offer the option of a scheme pension. However, should a DC scheme allow for a scheme pension, the member should first be given an opportunity to select a lifetime annuity instead • a lifetime annuity—pre-6 April 2015 lifetime annuities payable by an insurance company had to satisfy...

View the related practice notes about Serious ill-health lump sum

Serious ill-health lump sum payments

If a member is expected to live for less than one year (defined as ‘serious ill-health’) then, provided certain conditions are met, the scheme administrator may commute any pension entitlement which that member holds under the scheme and pay them their entire benefit entitlement under an arrangement as a lump sum. This type of authorised member payment is referred to in the legislation as a serious ill-health lump sum.Conditions for payment of a serious ill-health lump sumCurrent conditionsUnder the Finance Act 2004 (FA 2004), Sch 29, para 4, a scheme administrator may pay a serious ill-health lump sum to a member if the following conditions are satisfied:•before it is paid, the scheme administrator has received evidence from a registered medical practitioner that the member is expected to live for less than one year. The term 'registered medical practitioner' refers to a person who is registered under the Medical Act 1983 or, where the member in serious ill-health is overseas, a person with equivalent overseas qualifications•since 16 September 2016, the payment must...

Ill-health early retirement—decision making and exercise of discretion

THIS PRACTICE NOTE APPLIES TO REGISTERED OCCUPATIONAL PENSION SCHEMESThe scheme rulesThe ill-health early retirement provisions of trust-based occupational pension schemes commonly confer decision-making powers on their trustees or sponsoring employers, or both. In some cases, the decision making will be limited to deciding whether the ill-health test set out in the scheme rules is satisfied. In other cases, the ill-health provisions may have a discretionary element in terms of deciding whether to grant an ill-health pension to a member.The definitions and scope of the ill-health provisions will vary between schemes an issues may arise in interpreting those provisions properly. For further information, see Practice Note: Ill-health early retirement—Interpreting the scheme rules.The relevant decision maker must consider each application on a case-by-case basis.The ill-health ruleOn receipt of an application for ill-health early retirement, the decision maker must first consult the relevant provisions in the scheme's governing documentation. It is essential to ascertain who decides whether a member is granted ill-health early retirement benefits.To ensure that an ill-health pension from a registered...

View the related q&as about Serious ill-health lump sum

If a Funded Unapproved Retirement Benefits Scheme which became an Employer-Financed Retirement Benefits Scheme on A-day provided for the payment of benefits at age 50, can those benefits still be taken at age 50 or do they have to be taken at age 55?

If a Funded Unapproved Retirement Benefits Scheme which became an Employer-Financed Retirement Benefits Scheme on A-day provided for the payment of benefits at age 50, can those benefits still be taken at age 50 or do they have to be taken at age 55? We refer you to Practice Note: Retirement schemes for executives—UURBS, FURBS and EFRBS. As mentioned in that Practice Note, Funded Unapproved Retirement Benefits Scheme which became funded Employer-Financed Retirement Benefits Scheme (EFRBS) on A-day continued to enjoy certain tax advantages following A-day. This includes, among other things, the fact that payments of benefits out of an EFRBS are not subject to National Insurance Contributions (NICs) provided: • they could have been paid out of a registered pension scheme • the employment relationship has ceased by the

The rules of a pension scheme allow members to defer taking a pension up to age 75 however if there is a situation where some members have not claimed their pension by this date, what are the consequences? Would a pension coming into payment after a members 75th birthday be a unauthorised payment? What is the impact of there being a benefit crystallisation event at age 75? Could the rules be amended to allow members to defer later than age 75? Notwithstanding that the schemes forfeiture provisions may come into play from age 75, or, if the member has not ever been in touch, from NRD.

The rules of a pension scheme allow members to defer taking a pension up to age 75 however if there is a situation where some members have not claimed their pension by this date, what are the consequences? Would a pension coming into payment after a members 75th birthday be a unauthorised payment? What is the impact of there being a benefit crystallisation event at age 75? Could the rules be amended to allow members to defer later than age 75? Notwithstanding that the schemes forfeiture provisions may come into play from age 75, or, if the member has not ever been in touch, from NRD. We have assumed that the scheme forfeiture rules do not apply. If a member reaches the age of 75 without having taken all their benefits, these unused benefits are tested against the lifetime allowance on the member’s 75th birthday. This is done through benefit crystallisation event (BCE) 5, 5A or 5B depending on the nature of the unused benefits. The only BCE...

View the related News about Serious ill-health lump sum

No requirement on employer or administrator to advise dying member of consequences of taking his benefits early (Mrs T PO-19080)

Pensions analysis: In the Pensions Ombudsman determination of Mrs T (PO-19080), a widow complained that her seriously ill husband should have been warned by his employer or the pension scheme administrator that taking his pension as he did would substantially reduce his life cover. The Pensions Ombudsman dismissed the widow’s complaint that the parties should have been more proactive in alerting her husband to the financial consequences of his decision in ceasing to be an active member. In any event this would have amounted to the giving of financial advice which the employer was not authorised to give and the administrator was not instructed to provide in the circumstances. Wyn Derbyshire of gunnercooke LLP looks at the decision.