Need Pension Advice Please

jacton

I am currently receiving a few small occupational pensions which range from £14500 per year to £250 per year and am now due another small occupational pension from Barnet Council.

They have sent me the projected figures plus the lump sum amount that I can receive. I have opted for the largest lump sum of £527 plus an annual pension of £86 per annum.

However I asked if under the 'Rules of Triviality' this pension could be payed up with a lump sum offer. I read on a government website that this option may be possible as the pension is so small.

Barnet council have informed me that as I breech the 1% of maximum allowance rule i do not qualify. I cannot find out how this calculation is made, but it seems ridiculous to me as a tax payer that Barnet council will go to the expense of maintaining a pension of £86 on a monthly basis. the cost of administering this pension must be more than they will pay me.

I would like to pursue my claim under the 'rules of triviality' and have this pension payed to me in one lump sum but do not know where I can now go to find out anymore on this 1% rule.

Can anybody help please

CannySaver_2

Hi

I'm afraid they are right.

Your existing pensions mean you do not qualify for triviality, you will therefore have to accept the £86 per month from Barnet Council, don't be too hard on them though, they don't make the rules!

The Canny Saver

Annisele

The 1% rule is (currently) to do with the Lifetime Allowance. You can find lots more information here.

Briefly, you can only use the triviality rule if your total pension pot is less than £18,000. If you have an occupational pension that pays you £14,500 per year, I don't need to do any calculations - your total pension pot must be significantly above £18,000, and so triviality doesn't apply to you I'm afraid.

molerat

The 1% triviality applies to the whole of your pension entitlement so you are well over the limits in that respect. http://www.pensionsadvisoryservice.org.uk/workplace-pension-schemes/final-salary-schemes/cashing-in-pensions-%28triviality%29

The other option would be under the "stranded pots" rules but that only applies to funds under £2K.

RichandJ

The triviality rules state that you must not have pension(s) from all non-state providers that exceed a value of 1% of the Lifetime Allowance. The Lifetime Allowance for this tax year is £1,800,000, therefore 1% = £18,000.

The method for working out the value of your pension(s) is dictated by HM Revenue & Customs and is equal to twenty times* the annual amount in payment. Thus if you're receiving a pension(s) of more than £900 per annum triviality does not apply.

These rules were brought in by the previous government, as CannySaver says, it's not the council's fault.

You could ask them if they're willing to pay your pension other than monthly, e.g. quarterly, semi-annually or even annually.

If you're feeling really insomniac you can read the HMRC triv comm rules here:

http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM09104900.htm

* it may be more than this depending on when they started but left as 20 for ease of calculation.

jacton

Many thanks to everybody now I understand. But just to correct my information the £86 is per annum and not monthly so my monthly amount after tax would be around £5.70 per month.

Did the Government change the Life time allowance amount recently?

dunstonh

Did the Government change the Life time allowance amount recently?

It has changed every year since 2006.

gadgetmind

jacton wrote: »

Did the Government change the Life time allowance amount recently?

Yes, but they decoupled the triviality limit from it as otherwise it would have dropped to £15k.

Anyway, £14.5k pa is a very, very good pension, which would require you to have saved over a third of a million pounds in a private pension, so I wouldn't worry about the 86 quid.

jacton

Just one more question, is the life time allowance an annual allowance or a one off.

I am still just a little unclear that if I am receiving an annual pension of £14500 and my life time allowance is £18000 what happens next year at the start of the next financial year, obviously if I receive a pension of over £14500 per year I will exceed my life time allowance.

Or is the life time allowance a total of what I can receive as a pension in one fiscal year?

RichandJ

Lifetime allowance - LTA- (£1.8m this year, not £18,000) is the overall limit on what an individual can receive in pension value - see my previous post re value - over their lifetime.

Your pension(s) are valued against the LTA only at the date they 'crystallise' (start in plain English), not every year.

So for e.g. if your £14.5k pension started this year that would equate to:

£14,500 x 20 = value of £290,000 for LTA purposes.

This equates to 16.11% of the LTA at the date the benefit started. So you've used up 16.11% of your available LTA and still have 83%+ to use.

If total benefits at any time come to more than 100% of the LTA then (severe) tax penalties can apply, but I don't think you need to worry. Unless you've got another £70 odd thousand pa pension coming into payment .

jacton

Many thanks again. My £14500 annual pension actually started in 2008.

Basically my pension payments for this year are as follows:-

HM Gov Pension £14500
TSB Private £ 280
Barnet Pension £ 86

Making a total annual pension of £14866

If my annual life time allowance is £18000 surely instead of £86 annually this could be converted into a lump sum as long as added to my two other annual pensions the total was less than the £18000.

I think this is all above my head. It must have taken you all your career to understand it all