Commenting on Steve Webb’s statement today that the Government should use trivial commutation to promote savings, David Brooks, a consultant at BROADSTONE, explained:
"I would urge Steve Webb to take this opportunity to have a re-think on the trivial commutation rules. These can be horrendously complicated and, because the triviality limit of £18,000 applies to the total held across all pension pots, they often result in individuals being unable to trivially commute small pension pots due to pensions saving elsewhere. It is possible, and indeed likely, the older workers, being auto-enrolled now, would have pension pots from previous employments which could breach the triviality limit.
"A few things could easily be done which would give certainty to members and ease administration. These include allowing schemes, used for auto-enrolment, to have a scheme specific triviality limit of £18,000, removing the limits on all trivial payments made in a 12 month period and making the lump sum completely tax-free."