The following Pensions practice note provides comprehensive and up to date legal information covering:
HM Revenue & Customs (HMRC) recognises that schemes could incur disproportionate costs in providing small pensions under registered pension schemes, so the legislation allows small or trivial pension benefits to be commuted and paid as a cash lump sum. From the recipient’s point of view, a single lump sum may be seen as more convenient and useful than a series of very small pensions payments.
'Trivial' commutation therefore involves the commutation of the whole of a member’s pension under a particular arrangement, or the total of a member’s pension under a series of arrangements, where the pension, or total pension, is of a very small amount.
Changes were made to the trivial/small lump sum commutation regime to reflect the pension freedoms introduced on 6 April 2015:
the first set of changes involved increasing the trivial/small lump sum commutation limits. These changes were announced by the Budget 2014 to take effect retrospectively from 27 March 2014. The statutory formalities bringing this legislation into force were completed on 17 July 2014, when the Finance Act 2014 (FA 2014) received its Royal Assent. The retrospectivity of the changes made through FA 2014 ensured that any payments made between 27 March 2014 and 17 July 2014 that were over the increased limits constituted authorised payments, and
the second set of changes involved lowering the age at which a member may
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