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GLOSSARY

Winding-up lump sum definition

Published by a LexisNexis Pensions expert

What does Winding-up lump sum mean?

A lump sum benefit paid to a member of an occupational pension scheme because the scheme is being wound up and their accrued benefits under the scheme are deemed 'trivial'. This lump sum must meet the conditions of the Finance Act 2004, Sch 29, para 10. A member of a scheme that is winding-up may commute their benefits under that scheme on the grounds of triviality as a winding-up lump sum. Unlike a trivial commutation lump sum, there is no minimum age before the benefits can be commuted into a winding-up lump sum.

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Commutation of small lump sums—checklist

Commutation of small lump sums—checklist Trivial commutation lump sums The conditions for payment of a trivial commutation lump sum as an authorised member payment are as follows: • the payment must be made either from a defined benefit arrangement, a collective defined contribution arrangement, in respect of a money purchase pension already in payment, or a combination thereof • the member must have either reached normal minimum pension age or met the ill-health condition • the member must have some lump sum allowance available • the payment must extinguish the member's entitlement to benefits under the scheme • the value of the member's pension rights across all schemes must not exceed £30,000 on the valuation date (known as the nominated date) • the lump sum payment must be paid within a 12-month window (known as the commutation period), and • The payment is made either: ◦ at the time when no trivial commutation lump sum has previously been paid to the member, or ◦ before the end of...

Winding up a pension scheme: the key steps—checklist

Winding up a pension scheme: the key steps—checklist THIS CHECKLIST APPLIES TO OCCUPATIONAL PENSION SCHEMES Planning wind up • Trustees should: ◦ review the scheme's trust deed and rules and establish which powers continue to apply after winding-up has commenced ◦ consider how winding-up will be triggered under the scheme rules and ensure that any formalities are complied with ◦ put a project plan in place at the earliest opportunity to allow for completion of at least the key activities in winding up the scheme within a two-year time frame ◦ where there is a recovery plan, prepare a winding-up procedure as soon as reasonably practicable ◦ meet regularly among themselves and with their advisers to ensure a well managed winding-up Complying with statutory disclosure obligations • Trustees should ensure that they: ◦ comply with statutory requirements to disclose certain information to members on scheme winding-up ◦ communicate with members on a regular basis to keep them up to date with developments ◦ comply with statutory requirements to make periodic...

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Pensions and death

Pensions and death This Practice Note looks at the benefits which are payable where a member of an occupational or personal pension scheme dies before retirement without having taken any benefits, or dies while in receipt of a secured pension or in receipt of a drawdown pension. It also examines the impact of inheritance tax (IHT) on the death benefits payable and provides some practical tips on actions members can take during their lifetime to reduce tax liabilities on benefits payable on death. Death before retirement Where a member of a pension scheme dies without having taken their retirement benefits or having taken part of their retirement benefits, the whole of the member’s unvested fund may be used to pay a cash lump sum, or to pay a smaller lump sum and dependants’ pensions, or to pay only dependants’ pensions. From 6 April 2015, the lump sum death benefit and/or survivor’s pension may be paid to a nominee or successor as well as to a dependant....

Drawdown before 6 April 2011 [Archived]

Drawdown before 6 April 2011 [Archived] THIS PRACTICE NOTE RELATES TO DRAWDOWN PENSIONS WHICH COMMENCED BEFORE 6 APRIL 2011 ARCHIVED: This archived Practice Note looks at the legal regime applicable to drawdown arrangements under registered pension schemes entered into before 6 April 2011, a time when such arrangements were then known as ‘unsecured pension’ and ‘alternatively secured pension’. This archived Practice Note is not maintained. For information on the legal regimes applicable to drawdown arrangements on or after 6 April 2011, see Practice Notes: • Drawdown between 6 April 2011 and 5 April 2015 [Archived] • Drawdown from 6 April 2015 • Drawdown and death benefits from 6 April 2015 What is a drawdown pension? The A-day tax simplification changes, which came into force on 6 April 2006 introduced a new drawdown regime for registered pension schemes which replaced the limited ability to drawdown pensions which existed prior to that date. The A-day changes introduced the concept of the ‘unsecured pension’ and the ‘alternatively secured pension’....

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