New Rules on "Triviality"

The triviality rules, in force since 6 April 2006, allow you to cash-in small pensions. In 2009/10 you must be between 60 and 75 and the total value of all your private pensions must be under £17,500. It is not a "per pension plan" limit.

Some people have pensions that are too small to convert into annuities but are unable to encash them as they have other pensions valued at more than £17,500.

To solve this problem a rule change will allow occupational pension scheme members to encash small pensions, even where they have total pension values of more than £17,500. This new rule will not apply to stakeholder or personal pension plans, or SIPPs.

The conditions for this new rule are:

• The payment must be under £2,000;
• You must be aged between 60 and 75;
• You must not be a controlling director of the sponsoring employer;
• Your rights to scheme benefits are extinguished;
• There must not have been a transfer out of the scheme in the 3 years before the date of payment;
• The first 25% of the payment is tax-free, with the remaining 75% taxable under PAYE.