Rachel Vahey highlights the complexities around trivial commutation
When we approach retirement age many of us start to think about how much pension we will receive and how we will receive it - an annuity, income drawdown or something in between. Problems arise if people have very small pension pots as their options are limited and, in some cases, it may not be worthwhile taking an annuity let alone even thinking about income drawdown. The Government recognises this and allows very small pension pots to be paid out as a cash sum at retirement, 25% of which is tax-free and the rest is taxed as earned income. This is known as the triviality commutation rule. ...
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