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Treasury

Answer

Mr. Webb: To ask the Chancellor of the Exchequer what plans he has to change the limits on the commutation of small pension funds into lump sums. [224261] Mr. Timms: From 6 April 2006 there will be a facility for pension scheme members to commute trivial pensions and take the pension as a lump sum, where pension benefits have a total capital value of less than 1 per cent. of the lifetime allowance. The lifetime allowance will be £1.5 million at its introduction in April 2006, rising to £1.8 million by 2010. So, at the introduction of the simplified tax regime, the trivial commutation threshold will be £15,000. People in this position will be able to choose a year falling between their 60th and 75th birthdays in which all trivial pensions may be commuted. The trivial commutation rules ensure that members will not be forced to purchase an annuity with very small amounts of pension savings which could prove to be uneconomic and disproportionately bureaucratic for both schemes and members. The rules are the result of extensive consultation prior to legislation. As part of this consultation the Government published "Simplifying the taxation of pensions: increasing flexibility for all" (December 2002) and "Simplifying the taxation of pensions: the Government's proposals" (December 2003).

Secondary information

Type

Written question

Reference

432 c1174W; 224261

Session

2004-05

Subjects

Annuities Pensions Lump sum payments Taxation Commutation of pensions

Contains statistics

Yes

Link

View this Written question on www.publications.parliament.uk