Cashing in small pensions

If you have a small pension you may be able to cash it in for a cash lump sum called a ‘trivial commutation’. 

Members with very small pensions have for some years been able, if they wish, to convert them into a one off taxable cash payment, provided that they meet certain qualifying conditions specified by HM Revenue and Customs (HMRC). This member option is known as 'trivial commutation'. 

To be considered for a trivial commutation you must meet all of the following:

  1. You must be aged over 50 (or have retired at an earlier age because of ill-health);
  2. The value of all your pension benefits (including defined contribution pensions and pensions already in payment, but ignoring any State Pension) when added together must not exceed £30,000 in total;
  3. You cannot have already exchanged benefits in any other pension arrangements more than a year before your payment from the Scheme is made (unless the previous payment was made before 6 April 2006);
  4. If you have a GMP then you will not be able to apply for trivial commutation until you reach your GMP payment age (which is 65 for men and 60 for women) and;
  5. You must have sufficient ‘Lifetime Allowance’ available in order for the lump sum payment to be made. 

What happens if you have more than one defined benefit pension (such as in the Scheme) for trivial commutation purposes?

If you give up more than one pension for trivial commutation purposes, you do not have to take them all at the same time. You have a period of 12 months from the date you were paid the first lump sum payment to commute take the rest. If you fail to do so, you lose this option and may receive tax charges. 

Tax treatment of taking a trivial commutation lump sum:

If benefits are not in payment (such as your Scheme deferred pension), you may have the option to take 25% of the pension value as a tax free cash sum. The remaining 75% is added to the rest of your taxable income in the tax year in which you take it when working out the tax that you may owe. 

If you have a small pension and are interested in cashing in your pension please contact the Scheme Administrator.

The Lifetime Allowance

The Lifetime Allowance (LTA) was introduced in 2006, and is a limit on the amount of pension benefits that can be taken from pension schemes, whether lump sums or retirement income (pension), without triggering an additional tax charge. The LTA amount changes each year, the current and previous LTA rates can be found at

While most people aren’t affected by the LTA, if the value of your pension benefits is approaching or above the LTA, you should seek advice from an independent financial adviser.