Trivial commutation is where a small pension benefit can be paid as a lump sum.

How do I know if I can take all my pension as a one-off lump sum?

The trivial commutation rules which all must be met to take your pension as a one-off lump sum are:

  • You must be at least age 55, or age 60 in the case of a woman with a Guaranteed Minimum Pension (GMP), or age 65 in the case of a man with a GMP, with no upper age limit.
  • You must add all your benefit values, of all pension arrangements including company pensions/personal pensions/stakeholder pensions/ retirement annuities/buy-out plans (but not State Pension), together and if they don’t exceed in total £30,000, trivial commutation may be possible.
  • All the benefits in the LGPS must be extinguished including all benefits from other LGPS funds.

You don’t have to commute all your pension arrangements if you’ve other pensions. You can commute some and leave others to provide you with retirement income. All transactions must take place within twelve months of the first one.

 

What are my options in the LGPS?

In the LGPS, it may be possible for you to take a lump sum under the ‘de minimis’ rules, even if the trivial commutation rules described above haven’t been met. However, this option isn’t available if you’re receiving payment of deferred pension benefits because of leaving the LGPS before 1 April 2008.

The ‘de minimis’ rules are:

  • You must be 55 or over or GMP age
  • You must not be a controlling director of the sponsoring employer
  • The payment must not exceed £10,000
  • The payment extinguishes your right to benefits under the scheme
  • There must not have been a transfer-out of the scheme in the three years preceding the date of payment.

If these rules are met, you may be able to receive your benefits built up in our fund as a lump sum. 

 

Will the trivial commutation lump sum be taxed?

The lump sum paid will be considered as income for tax purposes. The first 25% of the lump sum payment will be tax free and the remaining 75% will be taxed. Unless you’re giving up a pension in payment, in which case the whole lump sum is taxed. Instructions from HMRC mean the tax is taken at source and you’re paid the remaining balance.

 

Further information about taking a small pension

The option to take a small pension benefit as a lump sum will only be provided to you if we think you might meet the criteria. If this applies and you are interested in this option please let us know and we will then send you further information.