Question On Working Out % For Existing Annuity

grantham_3

In January 2011 I will be aged 60, so I may be able to take my pension as a Trivial Lump Sum. This is where the pension is paid out in one payment with I believe no tax paid on 25% of it, and tax paid on the other 75%.

The 1% of the Standard Lifetime Allowance is £18,000 at the moment.

My protected pension fund is £15,065 right now. This is 0.83% of the SLA.

I assume therefore that on that basis I could, if I wished, take the whole $15,065 as a lump sum.

But, I also have a tiny annuity (non-protected type) which is paid to me twice a year which I took at the age of 50. This pays me £126.24 a year and is level.

My question is, how do I work out whether this annuity puts me above the 1% total allowed for these, my only two pensions? Is there a formula to follow?

molerat

http://www.hmrc.gov.uk/manuals/rpsmmanual/rpsm09104900.htm

Clear as mud though

I make your annuity worth £3787 (126.24 x 25 x 1.8 / 1.5) for commutation purposes so would tip you over the edge, I could be wrong though so hopefully someone with more in depth knowledge will be along to help

grantham_3

Thanks for that. They don't make it easy do they?

grantham_3

Can anyone confirm that the formula above is the correct one to use? I need to know the right way because if I choose another pension payout option it may be too late to change it back again.

molerat

I would contact the administrators of the pension you want to commute as they are obliged to ensure that you are eligible for commutation, they would have to work the figures anyway..

grantham_3

Well, the company I'm getting the annuity already through is Canada Life. At one time I was with Royal Sun Alliance, they then disposed of (for whatever reason) both my non-protected and protected policies to Phoenix.

RSA initially paid out on the non-protected annuity when I reached 50, then Phoenix started paying the non-protected for a year or so, then as I say, for some reason Canada Life took over paying it out.

Meanwhile my protected policy remained with Phoenix, and it's this one that I've requested various figures from if I decided to collect a 25% lump sum, or possibly the whole lot as a trivial sum - if I qualified.

Phoenix don't now have any information about the first annuity, as they aren't paying it out now. I contacted Canada Life, and all they could confirm was how much they are paying me per year, which of course I knew anyway.

So, basically, I'm the one it seems who has to do the working out with the sums to see if I qualify for the trivial payment or not. Phoenix has sent me the forms to fill in and enter the figures to the best of my knowledge if I do select the trivial payout when I'm 60. I just don't want to get it wrong and incur the wrath of the Inland Revenue if the total does exceed the £18,000.

molerat

http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM09105040.htm

You provide Phoenix with relevant amounts and dates and they tell you if you are eligible or not. They have a duty to confirm eligibility and as long as you give them accurate information they will have to work it out and you are not liable if they screw up. Any pre 2006 payments are discounted from the calculations.

grantham_3

Ok, thanks, that's a useful link. I've just phoned Phoenix and someone from their admin team will do the calculations and write to me. :T