Trivial Pensions

The present web site British isles pension procedures allows you to definitely have a lump sum freed from tax from your pension pot after you pick to acquire retirement added benefits. The maximum tax totally free lump sum offered is 25% on the fund worth.

The 25% rule applies to most defined contribution pension techniques - stakeholder, personal pensions both individual and group. The maximum allowable with regards to ultimate income (defined reward) may possibly change and the lump sum payment will rely upon the plan rules.

When your pension pot is tiny you might have the option to take the full fund like a lump sum. To get your pension under the trivial rules you should satisfy a number of problems:

one. You haven't been compensated a trivial commutation lump earlier from any registered pension plan. 2. To the date you selected to commute your pension legal rights they do not exceed 1% from the lifetime time allowance. three. The lump sum should be compensated through the age of 60 and no later than 75.

The 1% rule is critical - Your full pension legal rights (the value of one's pensions) should be no larger than the lifestyle time allowance from the year you commute advantages. For 2010/11 & 2011/12 the everyday living time allowance is £1.8 million so your 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 under the 1% existence time allowance - However it is the combined value - All your pensions needs to be valued at £18,000 or less. If for any reason you do receive a lump sum payment that does not fulfill the procedures you will be subject to a 40% tax charge, the plan could also be subject to a further tax charge. If you fulfill the criteria you and wish to choose 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 while in the yr you receive it.

Applying for Trivial Pensions:

So, if you have reached sixty you need to calculate any pensions not in payment. If the full benefit does not exceed £18,000 then chances are you'll be able to a take the whole pension like a lump sum. If you've got a pension paying positive aspects you will need to take 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 advantages for 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 free of charge initial meeting anywhere in England and Wales. You can arrange the meeting at your home or place of work.

For more information on SERPS / S2P - Please visit my dedicated SERPS Pensions Blog

Alternatively please visit www.ssaspension.co.uk for information on SSAS Pensions and how you can use them to fund your business growth