The recent Budget was great news for many people, with one key area where rules will have a swift, positive, impact – the changes to Triviality Rules within pensions.
The Trivial Benefits rules allow individuals to access their pension funds immediately as a lump sum if the value of those pensions are small. Many of the budget rules don’t kick in until 2015 however the Triviality changes are already in place.
Once you are age 60, if your pension fund is valued less than £10,000 then you can access this fund as a lump sum, irrespective of any other pensions you may have. Furthermore 25% of this encashment will be tax free.
This has created a clear opportunity for savers.
It is possible for someone to save £8000 into a pension, receive tax relief of £2000 to create a fund of £10000. A Higher Rate tax payer will receive even more tax relief.
The saver can then take the benefits immediately. If you are a non-tax payer when taking the lump sum then the £10,000 fund would effectively be tax free. If you are a basic rate tax payer, then the fund after tax would be £8500.
The rules allow this Triviality option to be exercised three times, separate from and in addition to the rules for commutation of combined funds under £30,000.
Whether you are a non-tax payer, basic rate tax payer or higher rate tax payer the rules could allow you to make between £1500 and £6000 tax free.
The Budget has introduced many encouraging changes and we are happy to help our clients maximise their position to take advantage of any quirks.
Please contact Platinum to discuss your current situation and how you can take advantage of the new rules.