£18,000 still counts as a trivial pension fund
Lifetime allowance. One of the many changes to the pension rules which took effect from April 6 was the reduction of the lifetime allowance (LA) from £1.8 million to £1.5 million. Where your fund exceeds this limit, there’s a special tax charge on the excess. The reduction won’t affect the majority of people but there’s been concern that it could have a knock-on effect for those with pension funds at the other end of the scale.
Trivial funds. If your total pension funds are less than 1% of the LA, i.e. £18,000 for 2010/11, subject to conditions, you can withdraw the whole fund as a lump sum instead of drawing it gradually as a pension. We’ve previously told you about the tax-saving opportunity this provides yr.9, iss.15, pg. 3, see The next step). The worry was that because the LA has been cut this would also reduce the 1% so-called trivial fund limit to just £15,000.
No link. The good news is that the link between the LA and the trivial pension fund limit has been broken. The government has confirmed that the trivial fund limit of £18,000 continues to apply until further notice.
For the previous article on trivial funds, visit http://tax.indicator.co.uk (TX 11.14.08).
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