HMRC to reduce up front tax take on cash from small pensions

Nicola Brittain
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Retirees with pension pots worth less than £18,000 will no longer have to pay higher-tax rate when taking a pension pot as cash, according to reports today.

This is the result of changes to the HMRC tax code for small pension pot savers to be implemented on 6 April 2013, the Daily Mail reports today. Normally when taking a pension the saver will have to buy an annuity - which provides an income for life from the savings. But anyone with less than £18,000 in total pensions can take the whole lot as cash. The taxman calls this ‘trivial commutation'.  Wealthier savers with small pots worth less than £2,000 can turn up to two of these into cash. Whenever you take a pension you can get 25% of it tax-free, and the rest is taxed. Curren...

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