Trivial Pension limit question

EdGasket

My wife, who is 56, works part-time for the NHS and is contributing to her pension with them. They estimate it will pay an income of only around £2,000 per annum if she retires at age 60. I have no idea how much 'value' this pension has or whether it has to be included in the total value of pensions limit of £18,000 for a trivial pension. She has no other pension provision.

I was wondering if it is possible for her to open a personal/stakeholder pension and so long as the value of it was below £18,000 when she was 60, for her to get all the money back as a lump sum and benefit from a 20% uplift on what she pays in due to the tax relief? I guess the question I am asking is whether the 'value' of her NHS pension is included in the limit of £18,000 for trivial pensions or whether the £18,000 limit applies only to personal pensions? If it is included, is there any way of finding out how much value her NHS pension counts towards the £18,000 trivial pension limit?

xylophone

http://www.pensionsadvisoryservice.org.uk/taking-payments-from-your-pension-pot/what-is-the-right-choice-for-me/taking-a-small-pension-as-a-cash-lump-sum
"You may be able to take the whole of your pension as cash if....

the value of all your pension pots added together is under the minimum level set by the Government.
The Government announces the level at the beginning of each tax year. For the tax year 2013/14 the level is £18,000."

"If you are in a defined benefit scheme, the value is the pension, multiplied by 20."

EdGasket

OK, I guess that eliminates her chances of a trivial pension cash boost then; thanks.

bigadaj

EdGasket wrote: »

OK, I guess that eliminates her chances of a trivial pension cash boost then; thanks.

It would be possible to do what you want by the stranded pots rule, ie ensure the pension pot is below £2000 at the point it is crystallised, so long as she is over 60 I think.

You need to check the provider offers this, as people have reported struggling to access pots by this route.

There's also a minimal benefit as the same tax rules applies, so 25% tax free but the rest subject to tax.

EdGasket

Yes I thought of the £2000 small pot rule but the gains don't seem worth the hassle of setting up several small pensions and it only needs one of them not to agree to pay you back cash and you're probably worse off than doing nothing.

bigadaj

EdGasket wrote: »

Yes I thought of the £2000 small pot rule but the gains don't seem worth the hassle of setting up several small pensions and it only needs one of them not to agree to pay you back cash and you're probably worse off than doing nothing.

Yup, and you're only allowed two in any case.