Finance Act 2004

Trivial commutation lump sum U.K.

7 (1) For the purposes of this Part a lump sum is a trivial commutation lump sum if— U.K.

(a) it is paid when no trivial commutation lump sum has previously been paid to the member (by any registered pension scheme) or, if such a lump sum has previously been paid, before the end of the commutation period,

[F1 (aa) it is paid in respect of a defined benefits arrangement, [F2 or in respect of a collective money purchase arrangement,] [F3 or in respect of a scheme pension payable by the scheme administrator to which the member has become entitled under a money purchase arrangement [F4 that is not a collective money purchase arrangement] (an “in-payment money-purchase in-house scheme pension”), [F5 or in respect of any combination of such arrangements and scheme pensions],]]

(b) on the nominated date, the value of the member’s pension rights does not exceed the commutation limit,

(c) it is paid when all or part of the member’s [F6 lump sum allowance is available (see paragraph 12A)],

(d) it extinguishes [F7 any entitlement to defined benefits [F8 , and any entitlement to collective money purchase benefits,] [F9 , and any entitlement to payments of in-payment money-purchase in-house scheme pensions,] that the member has] under the pension scheme, and

(e) it is paid when the member has reached [F10 normal minimum pension age (or the ill-health condition is met)] F11 ....

(2) The commutation period is the period beginning with the day on which a trivial commutation lump sum is first paid to the member and ending 12 months after that day.

(3) The nominated date is the day within the period of three months ending with the first day of the commutation period nominated by the member (or, if no date is nominated, is the first day of the commutation period).

(4) The commutation limit is [F12 £30,000].

[F13 (4A) The Treasury may by order substitute for the amount for the time being specified in sub-paragraph (4) such larger amount as is specified in the order.]

(5) The value of the member’s pension rights on the nominated date is the aggregate of—

(a) the value of the member’s relevant crystallised pension rights on that date (calculated in accordance with paragraph 8), and

(b) the value of the member’s uncrystallised rights on that date (calculated in accordance with paragraph 9).

Textual Amendments

F1 Sch. 29 para. 7(1)(aa) inserted (17.12.2014) (with effect in accordance with Sch. 1 para. 71(2) of the amending Act) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 71(1)(a)

F2 Words in Sch. 29 para. 7(1)(aa) inserted (1.8.2022) by Finance Act 2021 (c. 26), Sch. 5 paras. 21(6)(a)(i), 25(1); S.I. 2022/874, reg. 2

F3 Words in Sch. 29 para. 7(1)(aa) inserted (with effect in accordance with Sch. 5 para. 9 of the amending Act) by Finance Act 2016 (c. 24), Sch. 5 para. 7(2)

F4 Words in Sch. 29 para. 7(1)(aa) inserted (1.8.2022) by Finance Act 2021 (c. 26), Sch. 5 paras. 21(6)(a)(ii), 25(1); S.I. 2022/874, reg. 2

F5 Words in Sch. 29 para. 7(1)(aa) substituted (1.8.2022) by Finance Act 2021 (c. 26), Sch. 5 paras. 21(6)(a)(iii), 25(1); S.I. 2022/874, reg. 2

F6 Words in Sch. 29 para. 7(1)(c) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 9 paras. 30(1), 124 (with Sch. 9 paras. 125-132A) (as amended by S.I. 2024/356, regs. 1, 4; and (18.11.2024 for the tax year 2024-25 and subsequent tax years) by S.I. 2024/1012, regs. 1(2)(3), 17)

F7 Words in Sch. 29 para. 7(1)(d) substituted (17.12.2014) (with effect in accordance with Sch. 1 para. 71(2) of the amending Act) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 71(1)(b)

F8 Words in Sch. 29 para. 7(1)(d) inserted (1.8.2022) by Finance Act 2021 (c. 26), Sch. 5 paras. 21(6)(b), 25(1); S.I. 2022/874, reg. 2

F9 Words in Sch. 29 para. 7(1)(d) inserted (with effect in accordance with Sch. 5 para. 9 of the amending Act) by Finance Act 2016 (c. 24), Sch. 5 para. 7(3)

F10 Words in Sch. 29 para. 7(1)(e) substituted (17.12.2014) (with effect in accordance with Sch. 1 para. 71(2) of the amending Act) by Taxation of Pensions Act 2014 (c. 30), Sch. 1 para. 71(1)(c)

F11 Words in Sch. 29 para. 7(1)(e) omitted (with effect in accordance with Sch. 16 paras. 85, 102 of the amending Act) by virtue of Finance Act 2011 (c. 11), Sch. 16 para. 29

F12 Sum in Sch. 29 para. 7(4) substituted (with effect in accordance with s. 42(8) of the amending Act) by Finance Act 2014 (c. 26), s. 42(1)

F13 Sch. 29 para. 7(4A) inserted (with effect in accordance with Sch. 18 Pt. 2 of the amending Act) by Finance Act 2011 (c. 11), Sch. 18 para. 4(3)

Modifications etc. (not altering text)

C5 Sch. 29 para. 7(1)(a)(b) excluded (6.4.2023) by The Public Service Pension Schemes (Rectification of Unlawful Discrimination) (Tax) Regulations 2023 (S.I. 2023/113), regs. 1(2), 25(2) (with reg. 1(3))

[F14 8 (1) The value of the member’s relevant crystallised pension rights on the nominated date is the aggregate of— U.K.

(a) the value of the member’s relevant crystallised pension rights on 5th April 2006, calculated in accordance with paragraph 10 of Schedule 36 (as if the member were the individual mentioned there), and

(b) if, at any time in the period beginning with 6th April 2006 and ending with the nominated date, the member has become entitled under a registered pension scheme to income withdrawal, a lifetime annuity or a scheme pension, the relevant capital amount, and

(c) if, at any time in the period beginning with 6th April 2006 and ending with the nominated date, the member has been paid a lump sum under a registered pension scheme, the amount of the lump sum.

(2) In sub-paragraph (1)(b) “the relevant capital amount” means—

(a) in relation to income withdrawal, the scheme pension capital value, as determined under paragraph 2A(3) and (4);

(b) in relation to a lifetime annuity, the annuity purchase price, as determined under paragraph 2B(3) and (4);

(c) in relation to a scheme pension under a defined benefits arrangement or a collective money purchase arrangement, the amount given by the formula—

where B and C have the same meaning as they have for the purposes of paragraph 2C(2);

(d) in relation to a scheme pension under a money purchase arrangement that is not a collective money purchase arrangement, the scheme pension purchase price, as determined under paragraph 2D(3) and (4).]

Textual Amendments

F14 Sch. 29 para. 8 substituted (18.11.2024 for the tax year 2024-25 and subsequent tax years) by The Pensions (Abolition of Lifetime Allowance Charge etc) (No. 3) Regulations 2024 (S.I. 2024/1167), regs. 1(2)(3), 2(3) (with reg. 6)

9 (1) The value of the member’s uncrystallised rights on the nominated date is the aggregate value of the member’s uncrystallised rights on that date under each arrangement relating to the member under a registered pension scheme. U.K.

(2) The value on the nominated date of the member’s uncrystallised rights under such an arrangement is to be calculated in accordance with section 212 (valuation of uncrystallised rights for purposes of section 210).