Under recently announced changes to pensions rules those aged 60 or over now have the option of taking a lump sum from personal pensions with a value of £2,000 or less. The changes mean that, as of 6 April 2012, those aged 60 or over may take personal pension funds worth £2,000 or less as a lump sum, regardless of the value of their other pension savings, according to Shaun Underhill a Partner at Winchester based solicitors Shentons: ” A maximum of two pension plans may be paid out as lump sums in this way. 25 per cent of each lump sum will be tax-free, with the remainder taxed at the taxpayer’s marginal rate of tax.”
Although pension plans are designed to provide an income during retirement, it is generally possible to take up to 25 per cent of the value of a pension fund as a tax-free lump sum, with the rest of the fund being used to provide a regular income. Since 2006, however, under an option known as the ‘trivial commutation’ rule, those with £18,000 or less in pension savings could withdraw all those savings as a lump sum. The limit will remain at £18,000 in future, regardless of changes in the Lifetime Allowance.
Shaun Underhill comments: “This move is intended to help those who have pension plans containing small amounts but who cannot make use of the trivial commutation rules, either because their total pension funds amount to more than £18,000 or because they have already made use of the rules in respect of another pension.”
If you feel you may need advice, Shentons Solicitors and Mediators can advise you, Call Shaun Underhill on 01962 844544 for further information.