Trivial commutation

There are a number of conditions you need to meet before we can pay your pension as cash:

• all your pensions (including those outside the Church of England) are ‘worth’ £30,000 or less
• if you have received a trivial commutation payment before, this was in the last 12 months
• you are 55 or over, or retiring due to health problems, and
• you are not over your Lifetime Allowance. 

Before we can exchange your pension for cash you need to add up how much all your pensions are worth. Working out how much a pension is worth depends on whether you are receiving, and if you are receiving it, whether it started before April 2006. You do not need to include your State pension, or any pension you have taken as a ‘small pensions lump sum’, but you do need to include all your other pensions including those you are already receiving, plus any defined contribution pensions. Adding up your pensions can be complicated. We can give you some guidance, but we cannot add these up for you.  It is up to you to check whether all your pensions are worth less than £30,000. 

If you would like to take a pension as cash you have 12 months from the date you take your first trivial commutation lump sum to take any others. If you want to take more than one pension as trivial commutation, ask all your pension schemes for a “value”. They need to be valued within 3 months of each other, so ask all your providers at the same time. You do not need to take all your defined pensions as a lump sum, you can still take others as a pension if you prefer the security of a guaranteed income.

We can trivially commute small pensions already being paid. Get in touch with us and we can let you know whether your pension qualifies for this.

If you are commuting benefits not in payment, we can pay 25% to you tax-free and the rest is taxed as income. Otherwise, the whole amount is taxed as income.

As we do not know your tax code, we use a basic rate tax code (BR) to work out your income tax. This may mean you pay too little or too much tax. In practice, if you are a basic rate taxpayer, or you do not pay tax then you could end up paying too much tax. If you are a higher rate taxpayer, you might not have paid enough tax as it will only be taxed at the basic rate of 20%.

If you have paid too much tax you can claim tax back. You can find out how to do this at gov.uk/claim-tax-refund/overview. If you have not paid enough tax, then you can pay more through your self-assessment tax return.

You can pay the charge by completing a self-assessment tax return and filling in the ‘Pension savings tax charges’ section. It is your responsibility to pay this. Fill out a return at gov.uk/self-assessment-tax-returns.