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LITRG welcomes extension of relief for cashing in small pensions
LITRG has welcomed draft legislation published by HM Revenue and Customs (HMRC) which extends the relief for cashing in small pensions valued at up to £2,000 to personal pension schemes.
Working with a number of representative bodies and members of the insurance industry LITRG has been seeking this extension since early 2010.
This is a welcome proposal from HMRC which will put small personal pensions on the same footing as small occupational pensions. For pension providers it will cut out the cost of administering small pension payments, and for the individual it will offer greater flexibility and choice over how to use their money in retirement.
Additionally, it offers an opportunity to access small pots for those with pension savings of more than £18,000, or who have already taken trivial commutations up to that limit but subsequently discover a small pot they were previously unaware of. HMRC believe that up to 25,000 people might benefit. With the advent of auto-enrolment, this could be an increasing number as time goes on.
There are still a number of areas in which the taxation treatment of small pension funds is not consistent with those for larger pensions - most notably in the age from which lump sums can first be taken and the time period over which this has to be done - but yesterday's draft legislation in response to representations is a welcome move in the right direction.
Contact: R Williamson (please use form at http://www.litrg.org.uk/ContactUs)