Statutory Instrument 2001 No. 117
The Personal Pension Schemes (Restriction on Discretion to Approve) (Permitted Investments) Regulations 2001
(The document as of February, 2008. Arhiv.Online Library)
2001 No. 117
The Personal Pension Schemes (Restriction on Discretion to Approve) (Permitted Investments) Regulations 2001
The Commissioners of Inland Revenue, in exercise of the powers conferred on them by section 638A of the Income and Corporation Taxes Act 1988, hereby make the following Regulations:
Citation and commencement
1.These Regulations may be cited as the Personal Pension Schemes (Restriction on Discretion to Approve) (Permitted Investments) Regulations 2001 and shall come into force on 6th April 2001.
2. - (1) In these Regulations unless the context otherwise requires -
(b) under which all the benefits that may be provided are money purchase benefits;
(b) that another person is entitled to rights in or in relation to those or identical relevant investments, including the right to receive such investments, or evidence of the right to them or the proceeds from such investments, from the person mentioned in paragraph (a);
(b) includes a person under whom an office is held;
(b) an approved pension arrangement falling within Chapter I of Part XIV of the Taxes Act, has the same meaning as "scheme member" in section 611(6)(a) and (b), and
(c) an approved pension arrangement approved under Chapter III of Part XIV of the Taxes Act, means an individual referred to in section 618(2);
(b) also includes a UCITS situated in a member state other than the United Kingdom which has been authorised by the competent authorities of that member state and is a recognised scheme;
(b) in relation to the management of which the scheme administrator is not required to consult with any member of the scheme except to the extent that an investment offers choices that are available to any person (whether or not a member of the scheme), and
(c) the value of which is applied to all members and not segregated among certain members or linked to certain members by reason of particular assets comprised in the fund;
(b) which may lawfully offer its shares to the public in an EEA State, and
(c) in relation to which, on the basis of its last published annual accounts, the ratio between the company's loan capital and the value of its ordinary shares is 50 per cent. or less;
(b) is not a UCITS, and
(c) may lawfully offer its shares to the public in an EEA State;
(b) in relation to which, on the basis of its last published accounts, the ratio between the company's loan capital and the value of its ordinary shares is 50 per cent. or less;
(2) For the purposes of these Regulations and subject to paragraph (3), any question whether a person is connected with another person shall be determined in accordance with section 839.
(b) are not arrangements falling within paragraph (2).
(2) Arrangements fall within this paragraph if they are either -
(ii) in managing those investments, the scheme administrator does not consult with any member of the scheme except to the extent necessary by virtue of the investment offering choices that are available to any person (whether or not a member of the scheme); or
(b) arrangements under which -
(ii) the payment of interest on those deposits comprises the only income of the scheme from its investments.
Definition of individual pension account
(b) income and gains arising from those monies when held as funds of the account.
(3) The second condition is that any monies so received consist of one or more of the following -
(b) amounts transferred to an approved pension arrangement from another approved pension arrangement,
(c) minimum contributions referred to in section 638(6)(c),
(d) minimum payments within the meaning given by section 8(2) of the Pension Schemes Act 1993.
(4) The third condition is that the funds and other assets of the account -
(ii) on behalf of the individual account holders as beneficial owners subject to the account rules, or
(b) in the case of assets consisting of units in a personal pension unit trust or, where the personal pension unit trust is an umbrella personal pension unit trust, in the respective parts of the umbrella personal pension unit trust -
(ii) are issued subject to the terms of the trust deed and the rules constituting the personal pension unit trust.
(5) The fourth condition is that the funds and other assets of the account are used only to provide benefits for individual account holders under approved pension arrangements and subject to the limits and rules of those approved pension arrangements.
(b) shares in a qualifying EEA open-ended investment company,
(c) units in a UCITS formed under the laws of a member state other than the United Kingdom which has been authorised by the competent authorities of that member state and is a recognised scheme,
(d) shares in a body corporate which is a qualifying UK investment company,
(e) shares in a body corporate which is a qualifying EEA investment company,
(f) shares in an investment company with variable capital, and
(g) investments falling within paragraph 3 of Part I of Schedule I to the Financial Services Act 1986 (Government and public securities).
(7) The sixth condition is that, where monies are received by the account that comprise an individual's investment in more than one approved pension arrangement, the amount relating to each approved pension arrangement is separately identified by the administrator of the account.
(b) details of the approved pension arrangements of which those individuals are members,
(c) the amount of the funds, and the description and value of the assets, held on behalf of each account holder,
(d) the amount of income and gains accruing to each account holder from funds and assets held on that individual's behalf,
(e) transfers of funds to another individual pension account on behalf of an account holder.
(9) The eighth condition is that, whenever required to do so by an officer of the Board, the administrator of the account has enabled that officer to audit and inspect all aspects of the management and administration of the account, including records and systems relating to the management or administration of the account.
(b) must be secured only on that property or on any other asset of the scheme, and
(c) where the property is subsequently sold, must be repaid on completion of the sale of the property.
(5) A self-invested personal pension scheme may borrow an amount to defray any liability to VAT arising on the purchase or development of commercial property in accordance with paragraph (4), but the period over which the amount is borrowed must not exceed -
(b) the period commencing on the date on which the purchase or development of the property is completed and ending on the day on which the amount of the liability to VAT is refunded to the purchaser,
whichever is the shorter.
(b) references to the development of commercial property include references to -
(ii) the refurbishment or renovation of, or any other improvements to, buildings.
Restriction on investments - personal pension schemes other than self-invested personal pension schemes
(b) any residential property other than that specified in paragraph (5).
(4) Assets which a personal pension scheme is not restricted under paragraph (2) or (3) from holding as an investment and which are also specified in regulation 4(6) may be held within an individual pension account.
(b) property which is, or is to be, occupied by a person who is neither a member of the personal pension scheme nor connected with a member of the scheme in connection with the occupation by that person of business premises held as an investment by the scheme.
(6) For the purposes of paragraphs (2) and (3), a personal pension scheme shall not be regarded as indirectly holding as an investment residential property where the scheme holds as an investment units in a unit trust scheme that holds residential property and -
(b) is an unauthorised unit trust whose gains are not chargeable gains by virtue of section 100(2) of the Taxation of Chargeable Gains Act 1992.
(7) For the purposes of paragraphs (2) and (3), a personal pension scheme shall not be regarded as indirectly holding as an investment residential property where -
(b) the property is not occupied by a member of the scheme or a person connected with him.
Restrictions on lending
(b) that person lends money to the member concerned or a person connected with him, and
(c) the loan has the effect of limiting or reducing in any way the return on the investment.
Restrictions on transactions with scheme member and others
(ii) a company which is connected with the member of scheme A, for the purposes of a business carried on by the company,
(b) the lease is granted on normal commercial terms,
(ii) the member of scheme A is, or becomes within a reasonable time after that acquisition, a director of the company to whom the commercial property is leased, and the member of scheme B is also a director of that company.
(4) Except in the circumstances specified in paragraphs (3) and (5), no interest in an asset may directly or indirectly be sold or leased by a personal pension scheme to a member or a person connected with him.
(b) a company which is connected with the member, for the purposes of a business carried on by the company.
(6) The conditions specified in this paragraph are that -
(b) the amount of the rent payable under the lease accords with a commercial rate and is supported by an independent professional valuation.
(7) For the purposes of paragraph (4) a sale by the scheme shall not be regarded as a sale indirectly to a member, or a person connected with him, if the purchase by the member or the person connected with him took place three years or more after the sale by the scheme.
(b) those subsidiaries do not themselves carry on the activity of making or managing investments.
(9) In this regulation "market value" means the price which the interest in the commercial property might reasonably be expected to fetch on a sale in the open market.
(b) in the case of a serialised borrowing arrangement in existence at the time of the pension date, a further instalment of the loan for that member.
(2) Paragraph (1) applies notwithstanding that the purpose of the borrowing arrangement or, as the case may be, the further instalment of the loan would be to acquire particular investments in accordance with the member's direction.
(b) is before the Board for approval,
the Board shall not be prevented from approving it under Chapter IV of Part XIV of the Taxes Act by reason only that it contains a provision or provisions of a description specified in any of sub-paragraphs (a) to (c) of paragraph (2).
(ii) the holding of which directly or indirectly as an investment would, by virtue of regulation 6 or 7, prevent the Board from approving the scheme;
(b) a provision which authorises the scheme to continue to lend money to a person in circumstances which, by virtue of regulation 8, would prevent the Board from approving the scheme;
1.Stocks and shares listed or dealt in on a recognised stock exchange.
2.Futures and options, relating to stocks and shares, traded on a recognised futures exchange.
4.Units in an authorised unit trust scheme.
5.Units in a unit trust scheme which -
(b) does not hold any freehold or leasehold interest in residential property other than that specified in paragraph 13 or 14 of this Schedule.
6.Eligible shares within the meaning of section 638(11) received by the self-invested personal pension scheme as contributions to the scheme.
(b) property which is, or is to be, occupied by a person who is neither a member of the self-invested personal pension scheme nor connected with a member of the scheme in connection with the occupation by that person of business premises held as an investment by the scheme.
14.Ground rents, rent charges, ground annuals, feu duties or other annual payments reserved in respect of, or charged on or issuing out of, property, except where the property concerned is occupied by a member of the scheme or a person connected with him.
(This note is not part of the Regulations)
These Regulations impose restrictions on the Board of Inland Revenue's discretion to approve a personal pension scheme by restricting the investments in which the scheme may invest.
Regulation 1 provides for citation and commencement, and regulation 2 for interpretation.
Regulation 3 defines a "self-invested personal pension scheme" for the purposes of these Regulations.
Regulation 4 defines "individual pension account" for the purposes of regulations 6 and 7 of these Regulations.
Regulation 5 introduces regulations 6 to 10 which impose restrictions on the investments in which a personal pension scheme may invest.
Regulation 6 provides that a self-invested personal pension scheme may only invest in those investments listed in the Schedule to these Regulations, and stipulates restrictions on a self-invested personal pension scheme's borrowing powers.
Regulation 7 prohibits personal pension schemes other than self-invested personal pension schemes from investing in personal chattels or, subject to specified exceptions, residential property.
Regulation 8 prohibits self-invested personal pension schemes from lending to any person, and personal pension schemes that are not self-invested personal pension schemes from lending to members of the scheme or persons connected with members.
Regulation 9 prohibits personal pension schemes from purchasing, selling or leasing assets from or to members of the scheme or persons connected with members (subject to exceptions relating to commercial property).
Regulation 10 prohibits self-invested personal pension schemes from setting up borrowing arrangements for a member, or issuing further instalments of an existing serialised loan, after an annuity first becomes payable to the member under the scheme or the member elects to defer the purchase of an annuity ("the member's pension date"). The regulation also prohibits such schemes from acquiring commercial property for a member after the member's pension date or he attains 65, whichever is the later.
Regulation 11 contains transitional provisions with regard to personal pension schemes which had not yet been submitted for approval, or were awaiting the Board's approval, when these Regulations came into force.
 1988 c. 1; section 638A was inserted by section 94 of the Finance Act 1998 (c. 36).back
 Section 660A was inserted by paragraph 1 of Schedule 17 to the Finance Act 1995 (c. 4) and subsections (11) and (12) of that section were added by paragraph 26(4) of Schedule 13 to the Finance Act 2000 (c. 17).back
 Section 481(2) was amended by paragraph 8(3) of Schedule 5 and Part IV of Schedule 19 to the Finance Act 1990 (c. 29).back
 O.J. No. L1, 3.1.94, p.3.back
 O.J. No. L1, 3.1.94, p.572.back
 S.I. 1997/470.back
 The definition of insurance company in section 431(2) was substituted by section 52(1) of the Finance Act 1995.back
 S.I. 1996/2827.back
 Subsections (10) to (18) of section 468 were added in relation to open-ended investment companies by regulation 10(4) of S.I. 1997/1154.back
 The definition of personal pension scheme in section 630(1) was amended by paragraph 2(2) of Schedule 11 to the Finance Act 1995.back
 1985 c. 6; section 266 was amended by section 117(3) of the Finance Act 1988 (c. 39).back
 1992 c. 12.back
 O.J. No. L375, 31.12.1985, pp.3-18, amended by Council Directive 88/220 (O.J. No. L100, 19.04.1988, pp.31-32).back
 Made by the Securities and Investments Board under regulatory powers in sections 52, 81, 85 to 88 and 90 of the Financial Services Act 1986 (c. 60) now vested in the Financial Services Authority (see Releases 148, 159, 169, 178, 189, 191 and 198).back
 1996 c. 8.back
 Section 839 was amended by paragraph 20 of Schedule 17 to the Finance Act 1995.back
 Section 638(6)(c) was amended by paragraph 20(3) of Schedule 8 to the Pension Schemes Act 1993 (c. 48), paragraph 22(2) of Schedule 7 to the Pension Schemes (Northern Ireland) Act 1993 (c. 49), paragraph 3 of Schedule 1 to the Social Security Contributions (Transfer of Functions, etc.) Act 1999 (c. 2) and Schedules 3 and 9 to the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999 (S.I. 1999/671).back
 1993 c. 48.back
 1992 c. 12.back
 Section 638 was amended by paragraph 13 of Schedule 13 to the Finance Act 2000.back
 The definition of pension date in section 630(1) was inserted by paragraph 2(2) of Schedule 11 to the Finance Act 1995.back
 O.J. 1979, L63/1. Article 6 was substituted by Article 3 of Directive 92/96 (O.J. 1992, L360(1)).back
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