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The contemporary UK pension regulations permits you to take a lump sum free of tax out of your pension pot while you select to take retirement benefits. The maximum tax unfastened lump sum available is 25% of the fund fee.

The 25% rule applies to maximum described contribution pension schemes – stakeholder, non-public free pension pot calculator each character and organization. The maximum allowable in terms of very last profits (defined advantage) may additionally range and the lump sum charge will rely on the scheme policies.

If your pension pot is small you could have the choice to take the whole fund as a lump sum. To take your pension under the trivial regulations you need to meet a number of situations:

1. You have now not been paid a trivial commutation lump formerly from any registered pension scheme.
2. On the date you chose to shuttle your pension rights they do no longer exceed 1% of the lifestyles time allowance.
Three. The lump sum must be paid from the age of 60 and no later than seventy five.

The 1% rule is very critical – Your general pension rights (the value of your pensions) need to be no extra than the existence time allowance in the 12 months you trip blessings. For 2010/11 & 2011/12 the lifestyles time allowance is £1.Eight million so your blessings have to be valued at no greater than £18,000.

For example you may have pensions valued at £18,000 and £14,000 – Both below the 1% existence time allowance – However it’s miles the combined price – All your pensions should be worth £18,000 or less. If for any cause you do obtain a lump sum payment that does not meet the guidelines you will be difficulty to a forty% tax fee, the scheme may also be difficulty to a in addition tax fee. If you meet the criteria you and desire to take multiple pension fund you must do so inside 12 months. If you fail to do this you will not be capable of cash in a further pensions beneath the trivial pension regulations. As with any pension lump sum 25% is paid free of tax, however the last 75% will remember as taxable profits inside the 12 months you acquire it.

Applying for Trivial Pensions:

So, when you have reached 60 you need to calculate any pensions not in price. If the whole cost does no longer exceed £18,000 then you may be capable of a take the complete pension as a lump sum. If you’ve got a pension paying advantages you will need to take these into consideration as nicely. You have to take recommendation and make sure your calculations are accurate earlier than searching at using the trivial pension rules to take blessings as a lump sum.

I’m a regulated IFA with over ten years revel in in advising clients on their retirement planning – Do you need pension recommendation? I specialize in: SERPS / S2P Pensions, SSAS Pensions and Pension Transfers.

I paintings on a price foundation and offer a loose preliminary assembly anywhere in England and Wales. You can arrange the assembly at your house or place of job.

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