Cashing In A Pension.

WoodruffsDad

My wife has a small pension with Norwich Union from a past employment which she has decided to cash in. She has another pension from her current employment plus State pension to help her in retirement when it comes. The cash sum would be very helpful right now.

The current value of Protected Rights units is: £5,865.31 and the estimated retirement fund on 16/03/2009 is: £6,232.22.

Norwich Union have told my wife that 25% of the cash value will be tax free but that she will have to pay tax at Emergency Code rate on the rest.

If she cashes this in how much will she actually receive?

EdInvestor

Is this a trivial commutation arrangement? if so, the 75% is normally taxed on the emergency code and then adjusted later in line with her tax code, whatever that is.

dunstonh

Has she told NU the amount of the other pensions. If her total towards the lifetime allowance exceeds 1% then she cannot excercise trivial commutation.

NU are not in a position to know if she is or is not eligible to do this. However, your wife will have to sign something to self certify that she is. Also, if you excercise the triviality option you have to do so with all the pensions within 12 months.

If you excercise the triviality option when you are not eligible to do so, the HMRC will find out (its recorded on your NI number and the systems can tot up if you exceed the 1% or 100%). You will then face an investigation by HMRC. That allows them to charge penalty interest which can be significant. So, make sure she is eligible and make sure she does all her pensions within the timescale (if she is eligible).

WoodruffsDad

Both she and I are now completely confused!

How do we know if it's eligible for the triviality option?

Tibbledom

JulianCBrown wrote: »

Both she and I are now completely confused!

How do we know if it's eligible for the triviality option?

A good place to go for information is the Pensions Advisory Service TPAS website

http://www.pensionsadvisoryservice.org.uk/occupational_pensions/triviality/index.asp

It tells you here all about the triviality rules and how to value each of the individual pensions to determine if you are within the triviality limits. It covers things like the 12 month rule also.

It is quite complicated. If you get stuck then why not give TPAS a call on the number on this website. They are a voluntary organisation offering free advice.

edit: and it sounds like your wife is not yet 60 at the moment and commutation through triviality is only possible between 60 and 75.

jem16

JulianCBrown wrote: »

Both she and I are now completely confused!

How do we know if it's eligible for the triviality option?

If the total of all her pension pots (excluding state pension) is not more than £17.5k then she is eligible.

You mentioned that she has another pension? What is the value of that pension?

dunstonh

How do we know if it's eligible for the triviality option?

You can either go by value or percentage. Jem has given you the value. However, some pension (final salary schemes for example) will give you the percentage.

If ALL the pensions exceed 1% of the lifetime allowance then you cannot do triviality. If all pensions are investment based and if all the values together add up to more than £17.5k then you cannot do triviality.

strawberry_shortcake

jem16 wrote: »

If the total of all her pension pots (excluding state pension) is not more than £17.5k then she is eligible.

You mentioned that she has another pension? What is the value of that pension?

She also has to be age 60 or more to be eligible for triviality