New rules for cashing in your pension
The 2014 budget made some changes which mean that more people may be able to 'cash in' their pension pots for a one-off lump sum as long as their pension provider offers this The changes come into force from 27 March 2014.
'Trivial Commutation' changes
Under the old rules, if you wanted to cash in your pension, all your pension pots added together had to be no more than £18,000 in total (subject to the exceptions for stranded pots, covered below). This limit has now been raised to £30,000 with effect from 27 March 2014.
'Stranded pots' changes
Under the old rules, even if you had more than £18,000 in pension savings (now increased to £30,000) you might still be able to cash in your pension for a one-off lump sum. If you have occupational pension scheme benefits you may have been able to give these up for a one-off lump sum if the value was no more than £2,000. If you have a private pension, you may have been able to give up to two small pots, provided that they were no more than £2,000 each. From 27 March 2014, the limit on the size of the small pot has been raised to £10,000, and if you have a private pension, you now may be able to cash in up to three 'stranded pots' instead of two.
If you would like to know more about these changes, including the full conditions for cashing in a pension, please see the 'Spotlight', here.
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