HOW TO DECIDE IF TRIVIAL COMMUTATION IS WORTH IT?

epsilon4900

I have a small amount of superannuation I am to get from this summer. One of my choices apparently might be what is called trivial commutation? This is where they give you a lump sum which is to take the place of monthly amounts. I have no idea if this is a good thing financially or not. Does anyone know how I can work this out? Are there any online tools for such a thing? Apparently if I have any other pensions worth more than 30K I am not eligible in any case. Does anyone know anything about this sort of thing? Thanks.

Brie

basically it's a way for the pension scheme to get you off it's books and not have to do annual increases and all the rest.  I would have thought that it would to be actuarially sound but have never seen what the calculations are based on.  Didn't think it was restricted if you have other higher value pensions though.  Just because you have a tiddly amount in scheme A doesn't really effect anything with the big block of money in scheme B.  Happy to be corrected. 

xylophone

• I have a small amount of superannuation I am to get from this summer. One of my choices apparently might be what is called trivial commutation? This is where they give you a lump sum which is to take the place of monthly amounts. I have no idea if this is a good thing financially or not. Does anyone know how I can work this out? Are there any online tools for such a thing? Apparently if I have any other pensions worth more than 30K I am not eligible in any case. Does anyone know anything about this sort of thing? Thanks.

  
  
  
  
  See
  
  https://www.litrg.org.uk/pensions/pension-withdrawals/small-pensions
  
  
  
  
• https://techzone.abrdn.com/anon/public/pensions/Guide-triviality-small-pots
  

Marcon

Brie said:

basically it's a way for the pension scheme to get you off it's books and not have to do annual increases and all the rest.  I would have thought that it would to be actuarially sound but have never seen what the calculations are based on.  Didn't think it was restricted if you have other higher value pensions though.  Just because you have a tiddly amount in scheme A doesn't really effect anything with the big block of money in scheme B.  Happy to be corrected. 

You can trivially commute a DB pension if the capital value from that scheme is no more than £10,000.

If it's more than £10,000 (capital value), then you can only trivially commute if the value of ALL your private pension provision (ie anything but the state pension) is no more than £30,000.

OP - I wouldn't get too excited about detailed calculations. First check if you're eligible, and if you are (ie total value of all your pensions is no more than £30K), think about whether you want a lump sum (?debts to pay off?home improvements?holiday), or an ongoing tiny pension (?might it impact on state benefits). Don't forget that a chunk of the lump sum is going to be taxable.

epsilon4900

Marcon said:

Brie said:

basically it's a way for the pension scheme to get you off it's books and not have to do annual increases and all the rest.  I would have thought that it would to be actuarially sound but have never seen what the calculations are based on.  Didn't think it was restricted if you have other higher value pensions though.  Just because you have a tiddly amount in scheme A doesn't really effect anything with the big block of money in scheme B.  Happy to be corrected. 

You can trivially commute a DB pension if the capital value from that scheme is no more than £10,000.

If it's more than £10,000 (capital value), then you can only trivially commute if the value of ALL your private pension provision (ie anything but the state pension) is no more than £30,000.

OP - I wouldn't get too excited about detailed calculations. First check if you're eligible, and if you are (ie total value of all your pensions is no more than £30K), think about whether you want a lump sum (?debts to pay off?home improvements?holiday), or an ongoing tiny pension (?might it impact on state benefits). Don't forget that a chunk of the lump sum is going to be taxable.

Thanks for this and the other postings. For the £30,000 rule is the value transfer values of other pension/s or some other kind of value? I know the transfer value/s of the pension pots I hold and they are together more than 30k
so if it's that then I am not eligible anyway.

Marcon

epsilon4900 said:

Marcon said:

Brie said:

basically it's a way for the pension scheme to get you off it's books and not have to do annual increases and all the rest.  I would have thought that it would to be actuarially sound but have never seen what the calculations are based on.  Didn't think it was restricted if you have other higher value pensions though.  Just because you have a tiddly amount in scheme A doesn't really effect anything with the big block of money in scheme B.  Happy to be corrected. 

You can trivially commute a DB pension if the capital value from that scheme is no more than £10,000.

If it's more than £10,000 (capital value), then you can only trivially commute if the value of ALL your private pension provision (ie anything but the state pension) is no more than £30,000.

OP - I wouldn't get too excited about detailed calculations. First check if you're eligible, and if you are (ie total value of all your pensions is no more than £30K), think about whether you want a lump sum (?debts to pay off?home improvements?holiday), or an ongoing tiny pension (?might it impact on state benefits). Don't forget that a chunk of the lump sum is going to be taxable.

Thanks for this and the other postings. For the £30,000 rule is the value transfer values of other pension/s or some other kind of value? I know the transfer value/s of the pension pots I hold and they are together more than 30k
so if it's that then I am not eligible anyway.

I think you've just saved yourself some brain cells - you're not eligible from the sound of things. It's the (current) transfer value of any defined contribution pension scheme(s), + the value of any defined benefit schemes  based on multiplying the projected starting level of the DB pension by 20 (based on the assumption you don't exchange any DB pension for tax free cash).