Buried away in the reams of pensions legislation is a ‘triviality rule’ allowing pension pots to be taken wholly as a cash lump sum where a retiree’s total pension savings are less than £18,000. A quarter of the cash sum is paid out tax-free and the remainder is taxable.
In the depths of the draft Finance Bill 2012 the Government proposes to extend the Personal Pension triviality rules enabling people aged 60 and over to cash-in two pension pots of £2,000 or less during their lifetime, irrespective of the value of any other pension savings. Again a quarter of the cash sum is paid out tax-free and the remainder is taxable.
Mark Soper of RetireEasy said: “A step in the right direction to ease the process of dealing with small pension pots at retirement but we would have liked the limit to be higher at say, £5,000 per pot.”