06 December 2011
The government has announced an extension to the rules that
allow small pension pots to be taken as a cash lump sum ('trivial
commutation' rules) The rules will allow people with personal
pension pots worth £2,000 or less to commute a maximum of two
such pots in their lifetime.
Currently, people can take a pension pot as cash after they
reach age 60 if the total value of all their pension savings is
less than £18,000.
However, for members of an occupational pension scheme there is
a secondary option which also allows them to take individual pots
worth less than £2,000 as cash. The government plans to
extend this option to personal pensions.
A joint HMRC and Treasury paper outlining draft legislation for
the Finance Bill 2012, published today, says: "In response to the
call for evidence paper on early access to pension savings, the
government has been exploring ways of extending the rules on
commutation of small pension pots to personal pensions."
Draft legislation was published on 6 December 2011 and it
appears that it will have retrospective effect to that date.
It will allow individuals aged 60 or over with small personal
pension pots of £2,000 or less to cash in a maximum of two
such pots in their lifetime. We will update our website and
news service in due course once we have examined the draft
legislation in detail.