What is Pension Triviality?
Currently, if you are aged 60 or more and the value of your combined pension funds is £30,000 or less, not including the state pension, you should be able to release the entire amount as a lump sum, rather than having a very small pension income for life.
In addition to the above, if you have up to 3 separate pots of less than £10,000 each you can take these as a lump sum as well.
From April 2015 the above may change depending upon the type of pension scheme you are in. Click here for more information about this change.
Why would I want to cash in my pension/s under the pension triviality rule?
The government generally considers a pension fund of less than £30,000 to be a relatively small amount, which is why these rules were introduced in the first place.
For example, if a person aged 60 has a fund of £30,000 to provide a pension for life, based on current income rates this would give him approximately £134.50 per month*.
On the other hand, if that person was to take the entire fund as a lump sum under pension triviality, it would take just over 18 years for the monthly amount to pay more. In other words, it would take 18 years before you are better off by taking the income instead of the cash sum.
What if I have multiple pensions?
Currently, as long as the total amount doesn't exceed the current threshold of £30,000, you should be eligible.
Some occupational schemes are difficult to value because your entitlement is based on an annual income, which needs to be converted into a fund value for the purposes of testing against the maximum threshold of £30,000.
What if I have another pension already in payment?
Even if you are currently receiving a very small pension, pension triviality rules can still be applied to any other pension funds that haven't yet been taken.
How is the triviality threshold calculated?
The government have set the threshold until April 2015 when new rules apply. Click here for more detail of the new rules.
If you do cash in a pension under pension triviality rules, normally a quarter of the amount paid is tax-free with the remainder potentially subject to income tax.. You should remember that future rates of tax can change and actual tax treatment will depend upon your individual circumstances at the time.
What if I am getting state benefits?
If you are in receipt of any means tested state benefits, particularly the pension credit, by taking the additional taxable lump sum those benefits are likely to be affected.
What if I exceed the limit?
If you have more than £30,000 in pension pots, but some individual ones are less than £10,000, then you can still take these small pots as a cash lump sum. You are allowed 3 such small pots. From April 2015 the rules are changing. Please click here for more detail. In any event we can still help you.
How do I find out if I am eligible?
This is very easy and we offer a free service to find out.
- Complete the Get Started form on the top right hand side of this page.
- This will allow you to print off an "enquiry form", which you will need to complete and send to us. A freepost address is provided.
- You must include all your pensions as this is vital for establishing your entitlement. A separate enquiry form should be completed for each pension.
- Once we have found out about your pensions we will contact you to discuss your options.
Sending us an enquiry form does not commit you to anything and there is no charge for finding out your options.
If you do decide to proceed a fee will be charged.
*All annuity figures are quoted before tax e.g. gross. This assumes that the person purchases an annuity on a single life basis, paid monthly in advance, guaranteed for 5 years and level in payment. Based on rates available 17 July 2014.
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The experience of the team individuals ranges from the least experienced juniors who deal with non technical administration duties, to the most experienced member of our team having started in the industry 44 years ago.
This wealth of knowledge and understanding is vital in providing you with the level of service you require.
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This service only applies to pensions in the UK. Taking benefits early will almost certainly reduce your pension income in retirement and is only suitable for a limited number of people and circumstances. This should not be seen as an easy option for raising cash. To find out if you qualify please contact us.