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MyCompanyPension.co.uk - Helping members of occupational pension schemes to better understand their benefits.
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:: Blog | March 2009 (10 blogs) | Trivial pensions
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I was at a meeting of the Specialist Pensions Forum yesterday where one of the topics of discussion was the proposed relaxation by HMRC of trivial commutation rules.
You might recall that pre A-Day, a pension below £260 p.a. held in an occupational pension scheme could be commuted for cash. Post A-Day, triviality rules were changed so that the value of any pensions, in aggregate, at or below 1% of the standard lifetime allowance (equal to £16,500 for the 2008/09 tax year) could be paid in cash with 25% payable tax free and the remainder taxed at the member’s marginal rate.
This has caused problems for many schemes, not least because of establishing that all five of HMRC’s conditions have been met to pass the triviality test.
In my experience, most scheme members would prefer to have a cash lump sum rather than one or more insignificant pensions lying around. However, the current proposals although welcomed, don’t have a realistic de minimis limit (proposed at £2,000 per scheme) given that we are now nearly 20 years after the original triviality limit was set. See:
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Mike Jones, MyCompanyPension.co.uk Ltd, March 27th 2009
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