Trivial Pensions

The current pension tracing service  United kingdom pension guidelines permits you to definitely have a lump sum free of tax from your pension pot once you choose to consider retirement advantages. The utmost tax totally free lump sum out there is 25% on the fund value.

The 25% rule relates to most outlined contribution pension schemes - stakeholder, individual pensions both individual and group. The utmost allowable regarding ultimate wage (outlined advantage) may possibly vary and the lump sum payment will rely upon the scheme guidelines.

In the event your pension pot is little maybe you have the choice to take the whole fund being a lump sum. To take your pension under the trivial regulations you should fulfill several problems:

1. You have not been compensated a trivial commutation lump beforehand from any registered pension scheme. two. About the day you chose to commute your pension legal rights they are doing not exceed 1% of the everyday living time allowance. three. The lump sum must be compensated from your age of sixty and no afterwards than seventy five.

The 1% rule is essential - Your full pension legal rights (the value within your pensions) has to be no increased as opposed to life time allowance during the year you commute benefits. For 2010/11 & 2011/12 the everyday living time allowance is £1.8 million so your added benefits should be valued at no more than £18,000.

For example you could have two pensions valued at £18,000 and £14,000 - Both of those beneath the 1% lifestyle time allowance - However it is the combined worth - All your pensions should be valued at £18,000 or less. If for any reason you do receive a lump sum payment that does not fulfill the principles you will be subject to a 40% tax charge, the plan may possibly also be subject to a further tax charge. If you satisfy the criteria you and wish to consider more than one pension fund you must do so within 12 months. If you fail to do this you will not be able to cash in a further pensions underneath the trivial pension rules. As with any pension lump sum 25% is paid out freed from tax, however the remaining 75% will count as taxable income from the 12 months you receive it.

Applying for Trivial Pensions:

So, if you might have reached sixty you need to calculate any pensions not in payment. If the complete value does not exceed £18,000 then chances are you'll be able to a take the whole pension being a lump sum. If you have got a pension paying advantages you will need to consider these into consideration as well. You should choose advice and ensure your calculations are correct before looking at using the trivial pension policies to choose gains as a lump sum.

I'm a regulated IFA with over ten years experience in advising clients on their retirement planning - Do you need pension advice? I specialize in: SERPS / S2P Pensions, SSAS Pensions and Pension Transfers.

I work on a fee basis and offer a no cost initial meeting anywhere in England and Wales. You can arrange the meeting at your home or place of work.