TRIVIALITY- RULES FOR SMALLER PENSIONS

Where an individual is aged over 60 (but less than 75) and their total funds from all pension schemes is less than 1% of the Standard Lifetime allowance (SLA) the entire fund can be taken as a lump sum. For the tax year 2009/10, this will equates to £17,500

For example 2008/9 (SLA £1,650,000) if the fund is £16,500 or below, 25% can be taken as tax free cash (£4125) with the balance taken as cash but taxed as earned income.

Time Limit

If you wish to cash-in more than one pension, assuming you meet the qualifying criteria above, you must do so within 12-months of cashing-in the first one.  You will not be able to cash-in any pensions after that 12-month period has expired.

New Rules From 1 December 2009 (occupational schemes only)

These new rules apply to occupational pension schemes only.  They do not apply to personal pensions, stakeholder pension and SIPPs.

They allow small occupational pensions to be cashed-in under triviality rules even if the main rules above have not been met.

The following are the main qualifying criteria:

* 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.

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