Cashing in a small final salary pension fund: how the 'trivial pension' rules can benefit you
If you have a small final salary pension, you may be able to take it all as a cash lump sum.
If you have a small final salary or other salary-related pension, you may be able to cash it in and take it all as a lump sum. These are called 'trivial commutation' or 'small pension pot' rules and apply to pensions worth less than £30,000. These shouldn't be confused with the 'pension freedom' rules introduced in April 2015, which allow anyone who's aged 55 or over and who has a pension pot (defined contribution) type pension to take all of it as cash.
Tax relief on pension contributions - what is it and how does it work?
Tax relief means that some money you'd normally pay in tax is paid into your pension. Here's what you need to know
When you pay money into a pension, in most cases you'll get tax relief. That means that the government pays some of the money you would normally pay as tax into your pension. That means if you're a basic rate taxpayer, you'll get an extra £20 for your pension for every £80 you pay in (making £100 in all). Here's how it works:
You can pay up to £40,000 a year into your pension or 100% of your salary - whichever is lower
If you need to save more into your pension, you can go back and 'top up' over the last three years
If you want to save for your retirement by investing your money in a pension, there are limits on how much you can pay in. The limit for the current year (2014-2015) is £40,000 or 100% of your salary, whichever is lower. There are also limits on how much you can invest over your lifetime. If you don't have any earnings at all, you can still have a pension and pay into it.