Income Tax (Earnings and Pensions) Act 2003 section 554V

Exclusions: purchases of annuities out of pension scheme rights

Section 554V provides an exclusion from the disguised remuneration charging rules in Chapter 2 for annuity contracts purchased using pension scheme annuity rights that accrued before 6 April 2011.

• Where an annuity contract is purchased from an insurance company wholly out of an individual's pension scheme rights, and those rights are wholly or partly pre-6 April 2011 annuity rights, the disguised remuneration charges in Chapter 2 do not apply to relevant steps taken by the purchaser or the insurance company in connection with the purchase or sale of that contract
• If the pension scheme rights used to buy the annuity are only partly pre-6 April 2011 annuity rights, any relevant step is split into two separate steps — one relating to the portion purchased from pre-6 April 2011 rights and another relating to the remainder — with the exclusion applying only to the first portion
• Any money or asset involved in the relevant step must be apportioned between the two separate steps on a just and reasonable basis
• An annuity contract for these purposes must be a life annuity granted in the ordinary course of business by an insurance company, meaning either a firm authorised in the EEA under Finance Act 2004 section 275 or a regulated annuity provider based outside the EEA