I note that the Lifetime pension limit is being raised to £1.75 million for 2009/2010. So does this mean that if the total of any person's private penion funds does not exceed £17500, then the whole of those funds may be taken tax free after the age 60?
John Williams
Replies (5)
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Triviality limit
If the aggregate of ALL your pension pots (employee, PPP, RAC etc etc) added together are 1% or less of the Lifetime pension limit, you may indeed encash 100% without tax penalty.
So the triviality limit has indeed increased for 09/10 to £17,500.
But the limit represents the total pots combined, not just individual pots or elements.
(state pension is excluded, and employer schemes forcibly wound up have some quirks as well).
Commute
The pension may be commuted to a value of 25% of the 'pot' . That is 25% of £17,500 or £1.5 million whichever figure you care to use as an example. Any money taken over that will be subject to tax. There may be special exemptions, for example where the person has a very short life left (less than a year) but otherwise 25% is the number to consider.
First the answer.
No...and if your pension 'pot' is only £17,500 you are not going to get much of a pension either.