The government has increased the trivial commutation limits, from £18,000 to £30,000.
Trivial commutation is the opportunity, offered by pension providers, to convert 100% of a small pension into a one-off cash payment.
The cash received is known as a trivial commutation lump sum.
In the 2014 Budget, Chancellor George Osborne announced that the government will allow people with defined contribution pension wealth more flexibility to access their savings by increasing the total pension wealth that people can have before they are no longer entitled to receive lump sums.
The increase is subject to people’s pension scheme rules.
The changes will take effect from 27 March.
Malcolm McLean, consultant at Barnett Waddingham, said: “The rise in the trivial commutation limits from £18,000 to £30,000 overall is much higher than anyone anticipated ahead of the Budget.”
The changes to capped drawdown and the increase in the ‘small pot’ and ‘triviality pension’ rules are welcomed for all savers. They will prevent those with smaller pension pots having to purchase poor value annuities and allow those with larger-sized pots to better plan their sources of retirement income, creating a far more flexible retirement regime. To maximise the benefits of the new and planned changes, investors will need to consider their tax position in each year of withdrawal, therefore holistic financial advice will be more important than ever.
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