Changes to the trivial commutation regulations from 1 December mean members of occupational pension schemes aged between 60 and 75 will be able to take pension pots of less than £2,000 as a lump sum.
This applies even if they have other pension savings that exceed the current limit of 1% of the lifetime allowance, which for 2009/10 is set at £1.75 million.
The changes could make it easier to administer occupational pension plans. Alicia Tse, principal at consultancy Mercer, said the change was to be “broadly welcomed”. She added: “Administrators can save a great deal of money by not having to continually pay out in respect of their scheme members, but by giving them a lump sum.”
Lesley Browning, partner in the pensions team at law firm Norton Rose, also said it would make things easier for employers. “It is not a radical change to the shape and structure of the benefit but it is an easement, so [members] with smaller benefits can be paid more easily. It will also be useful for schemes that are in wind-up, as it is a simple way to secure small benefits.”
Transport company First Group is one employer that will be giving eligible staff the chance to take advantage of the new legislation. John Chilman, the firm’s director of reward and pensions, said: “We can now go to people and say ‘this is available now, would you like to take it?’ It is nice to see some pensions legislation which is helpful.”
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