A trivial lump sum (or trivial commutation) means taking your benefits from the Scheme as a one off taxable cash lump sum. This option is only available for Final Salary members.
If the Capital Value of all your Pension Savings is under £30,000, you may be able to exchange your Annual Pension payment for a one-off lump sum payment instead of us paying you a pension.
To receive this, you must be eligible under the following HM Revenue & Customs (HMRC) triviality rules:
● You must be Age 55 or over.
● You may not be able to claim a trivial lump sum payment if you are a controlling director of your employer, or if you have made a transfer into or out of this plan.
● The current value of all your pension savings, including plans already in payment and any pensions from occupational pension schemes, must not be greater than £30,000 on the nominated date.
If you have a number of different pension arrangements and you decide to take a trivial lump sum payment, you must take all your trivial lump sum payments within 12 months of taking benefits under the first plan. If the first trivial lump sum was taken before 27 March 2014 your commutation limit will be £18,000 (not £30,000).
How to calculate your benefits to ensure you are below the £30,000 limit
There are different ways to calculate the capital value of your pension benefits depending on the source:
• Defined benefit (or final salary) benefits are given a capital value by multiplying the annual pension by 20;
• The capital value of defined contribution (or money purchase) benefits is the total fund value;
• The capital value of a cash sum payable after 6 April 2006 is the value of the cash payable;
• Pensions in payment before 6 April 2006 are given a capital value by multiplying the annual pension by 25.
Is the Lump Sum taxed?
Most members will be eligible to take 25% of the lump sum tax free with the remaining amount being taxed at your marginal rate. There may be instances where the 25% tax free option will not be available.
All Trivial Lump Sums are treated as income in the tax year in which they are paid. This could impact any tax allowances, such as age allowance or any means tested state benefits.
If you elect to receive the Trivial Lump Sum payment, HM Revenue & Customs (HMRC) require that we deduct tax using the basic rate (BR) tax code. The tax deducted may not be the right amount due based on your individual circumstances.
Full details regarding the tax deduction will be provided upon payment of the Trivial Lump Sum.
Small Pot Lump Sum
If your pension savings under the KPS is below £10,000, then you may be able to convert your annual pension into a one off taxable cash sum without taking into account your other pension savings. 25% of this will normally be paid tax free as well and you must meet all the other criteria set out by HMRC.
What other options are available to me
Please click here to view other options available to you.