Pensions - Commutation using HMRC 'Triviality' Guidelines

[moggie 939]

Hello
Perhaps someone could answer simoly this queation as I can't quite understand the HNRC website.
I am told by my pension provider that they are willing to commute my small pension to cash but that it depends on HMRC 'triviality' rules. I have a couple of other very small pensions and working it out I don't quite understand what it means by 'all pensions other than State must be less than 1% and there is a figure for this year of �1.5million!
Is this �1.5million the total of what the three pension funds have or am I missing something as my total nonstate pensions only amount to less than �800 pa including the on I wish to commute.
Can HMRC refuse to allow the vommutation?
Thanks
Moggie

[factor-fiction]

The figure of �1.5 million was for the total maximum lifetime allowancea few years ago (I think the figure was �1.5 m but has increased annually and may be closer to �1.8 million now).
The pension is trivial if the pot is less than 1% of this figure- so based on a �1.5 million limit the 1% equates to �15000.
I don't know whether this is per scheme or relates to the total value of your various pots.
If your pension is going to be around �800 pa then I can only guess on the value of your pot but it's going to be pretty close to the �16000 figure, so it could be touch and go. You need to check with your HMRC

[dasherman]

You may find this link interesting:-

http://www.pensionsadvisoryservice.org.uk/Occu pational_Pensions/Triviality/

[moggie 939]

Thanks both of you. On the second answer I had looked at this site, but could not understand it!

Factor 30 - thanks for this. My actual pension to commute is only 270 pa, so I still don't understand this 1% of...
Understand that 1% of 1.6 million is 16k, but how do I calculate from there?
Thanks again - can anyone else throw some light on this?
Tried to contact HMRC, but the person on the phone couldn't understand it either!

Thanks

Moggie

[factor-fiction]

You need to ask your pension provider for the transfer value of your fund.
A rough guide used to be to multiply the annual pension by 20, so for a pension of �270 pa the fund value must be around �5400. However this multiplier may be out of date now so you need to check. The pension provider will know the transfer value as they will have used that to work out the annual pension

[moggie 939]

Thanks for coming back Factor30. The transfer value is 12 as they are paying me 3200.

How does that affect the 1% and the 15K/16K figure you mentioned?

Thanks again

Moggie

[factor-fiction]

I don't understand what you mean when you say "The transfer value is 12 as they are paying me 3200. " .
I assume you mean �12000. Have they stated that this is the transfer value?
What is the �3200 - is that a 25% lump sum commutation? If so, the fund value would be �12800.

This fund is less than the figure of �16000 (1% of �1.6 million) so is trivial. However you need to check with HMRC whether triviality only applies if the value of all pensions in total is below �16000 or whether it relates to each separate pension

[moggie 939]

Thank Factor 30 - I am confusing myself now! They have offered me �3200 as a lump sum and the pension is �270pa at moment (my advanced ! age has a bearing on the offer)
My other pensions only amount in total to about �500pa.
Sorry about confusion. Will ask HMRC if it means just this or ALL the pensions.
It seems a very small amount in total - so you would think I qualify.
Thanks fo your patience in explaining this. We will leave it at that!

Moggie

[moggie 939]

Factor30
Forget the reply above this am - I have now found out (almost) how it works as my Pension Provider explained to me that I must ad up all my pensions, other than State, and if they come to say �800pa I then X 20 which + �16000 and is therefore within (as you explained) the 1% of current �1.65m. All well and good.
What they could not explain is the note on HMRC site that seemed to indicate that if the pnsion were in payment BEFORE 2006 which mine were, then the X figure is 25! which means I am out - even if I wait until 6 Apil this year when the figure is then 1% of �1.75m
Thanks again for helping me with this.
Moggie

[Captain Spod]

The 25X for pensions in payment before 2006 is used to make up for the fact that you probably took 25% cash at the time you started getting the pension. The idea is that they add up EVERYTHING and then see if it exceeds 1.5% of this year's Lifetime Allowance.

[moggie 939]

Thanks- but I never took any cash from the pensions which came into force in 2001!

Does that mean I am 'goosed'? as I qualify at the moment, but if it is x25 instead of x20 that makes the figure 20k instead of 16K

Thanks

Moggie