You are currently NOT logged in.
Triviality rule
There is a way to cash in all of your pensions as long as they are under a certain limit of 1% of the lifetime allowance, which calculates at £18,000 for tax year 2010/11. You can only
|
|
exercise this option if you are between 60 and 75 (unless the special exemption applies) It is important to remember that this is the combined value of all of your plans put together, not individual plans. If you have a pot of £17,000 that you want to keep going but a smaller pot of £2,000 which you want to cash in under the triviality rule then you can’t, because the combined value is greater than £18,000. Calculating the value of your pensions is easier for some than other. Here’s a guide on how to do it |
Personal, Stakeholder & Occupational money purchase plans that have not yet been vested (i.e. converted to an income)
The amount is simply the current cash value of the fund.
Occupational Final Salary or Average Salary schemes not yet vested
These schemes work on a 1:20 rule based on the amount of annual pension you have already accrued. Say it is £5,000 per annum then the current notional ‘value’ of the pot will be £5,000 x 20 = £100,000.
Pensions you are already receiving which started before April 2006
The annual pension you were receiving on 5th April 2006 is multiplied by 25 and then up rated against the change in the lifetime allowance.
For example, you started to receive an annual pension of £1,500 in 2002. This had increased to £2,000 per annum by 5th April 2006.
This figure is then multiplied by 25 to give a notional value of £50,000. However the lifetime allowance in 2006/07 was £1,500,000 and in 2010/11 is £1,800,000.
Therefore the £50,000 needs to be divided by £1,500,000 and then multiplied by £1,800,000 to get the current notional value which would be £60,000.
Pensions you are already receiving which started after April 2006
These are indexed up to the current year as a pro rata proportion of the Lifetime Allowance.
Say you received a pension of £1,000 per annum that started in 2006. That is multiplied by 20 to give its notional value at the time, which would be £20,000.
The Lifetime allowance in 2006 however was £1,500,000 and is £1,800,000 for 2010/11. Therefore the £20,000 is divided by £1,500,000 and multiplied by £1,800,000 to give £24,000, which becomes the current notional value for the purposes of the triviality rule.
There is a time limit on excercising the triviality option. You have 12 months to cash the plans starting from the date that you cash the first one.
Special Triviality Rule for Occupational Pensions
This is a stand alone rule, and applies to occupational pensions only. It can allow many small schemes to be cashed in, irrespective of any other arrangements that you may have.
The criteria for it to qualify are
•You must be between 60 and 75;
•You must not be a controlling director of the sponsoring employer;
•The payment must not exceed £2,000;
•The payment extinguishes your right to benefits under the scheme; and
•There must not have been a transfer-out of the scheme in the 3 years preceding the date of payment; and
•The first 25% of the payment is tax-free, with the remaining 75% taxable under PAYE.
If you have an old or frozen pension plan then you should have it reviewed by the qualified experts.
You may be able to:
- Increase the value of your pension
- Unlock your pension
- Consolidate your plans
- Save £thousands in pension charges
- Access better performing funds
- Release tax free cash from your plan
- Receive an immediate income
