16 April 2012
Usually in order to cash in pension benefits, the value of all
your pension pots added together (not including your State pension)
must be less than £18,000. However, this means that if
you have a larger pension, you may be left with another small
benefit - a 'stranded pot' - which is too small to use to buy a
pension.
In 2009, a new rule was introduced so that people with stranded
pots from occupational schemes or public sector schemes with a
value of less than £2,000 could cash them in.
From 6 April 2012, you may also be able to exchange your pension
benefits for cash if you have a non-occupational or non-public
sector pension such as a personal pension, SIPP, section 32 buyout,
stakeholder plan of section 226 contract (retirement annuity
contract).
The new rules allow you to cash in non-occupational pensions to
be cashed in as a stranded pot, if you have other, larger
pensions.
The rules are:
- You must have reached the age of 60;
- The payment does not exceed £2,000;
- It extinguishes all your rights under the arrangement; and
- You have not previously received more than one payment under
one of these types of schemes. This excludes any separate 'stranded
payments' commutation under an occupational or public sector
scheme.
Click here to read
more about the rules for cashing in small pensions.
