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HMRC internal manual

Pensions Tax Manual

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HM Revenue & Customs
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Member benefits: pensions: drawdown pension rules immediately before 6 April 2015: flexible drawdown pensions - other issues (up to 5 April 2015)

Glossary PTM000001
   

Pension sharing orders and flexible drawdown pension funds (up to 5 April 2015)
Reaching the age of 75 (up to 5 April 2015)
Flexible drawdown when benefits came into payment before 6 April 2011 (up to 5 April 2015)
Transferring benefits to another registered pension scheme (up to 5 April 2015)
Tax consequences of taking flexible drawdown whilst not resident in the UK in that tax year (up to 5 April 2015)

Note: Flexible drawdown funds in existence immediately before 6 April 2015 are from that date automatically treated as flexi-access drawdown funds, which have different rules. No new flexible drawdown funds can be set up from that date. For guidance on flexi-access drawdown funds, see PTM062700.

Pension sharing orders and flexible drawdown pension funds (up to 5 April 2015)

The value of a flexible drawdown pension fund will be reduced in accordance with the pension sharing order. The scheme administrator does not need to carry out a recalculation of the maximum pension as they would have to if the member were using capped drawdown.

Reaching the age of 75 (up to 5 April 2015)

Any funds in the flexible drawdown pension fund will be tested against the lifetime allowance. As there is no limit on the amount that can be taken from the scheme the scheme administrator does not have to carry out any extra calculations simply because the member is now 75.

For more information about the lifetime allowance test when a member reaches 75 see PTM088650.

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Flexible drawdown when benefits came into payment before 6 April 2011 (up to 5 April 2015)

Provided they met the minimum income requirement, a member whose pension before 6 April 2011 was being paid as unsecured pension or alternatively secured pension can switch to flexible drawdown.

But a scheme pension or lifetime annuity in payment before 6 April 2011 cannot be converted into flexible drawdown pension.

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Transferring benefits to another registered pension scheme (up to 5 April 2015)

Benefits can be transferred. The scheme receiving the transfer must put the transferred rights into a brand new, empty, arrangement under the new scheme, and provide the member with a flexible drawdown pension.

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Tax consequences of taking flexible drawdown whilst not resident in the UK in that tax year (up to 5 April 2015)

Whether or not a member has to pay tax depends first on the terms of any double taxation arrangements there are between the UK and the country where they are resident. Most treaties give taxing rights over pensions to the country where the recipient is resident, but this is not true of all of them. If the UK exceptionally retains taxing rights over non-residents receiving pensions from a registered pension scheme in the UK, either under the double tax agreement or because the UK has no double tax agreement with the country where they are resident, the amount drawn down will be subject to UK tax.

If the member is not resident in the UK in the year they receive a flexible drawdown and they are not liable to tax on the drawdown under the terms of a double taxation arrangement with the UK, whether or not they have to pay tax next depends on how long they are non-resident for. If they:

  • were UK resident for at least 4 of the 7 tax years before their year of departure from the UK, and
  • they return to the UK and become resident for tax purposes, and
  • there are fewer than 5 tax years between the year of their departure and the year of their return

then they are taxed on the amount taken as flexible drawdown as though it had accrued in the first year in which they became UK resident again for tax purposes.