In its pension simplification proposals the Government has announced a potential rise in the triviality limits. A 'trivial' pension fund is currently classed as £2,500 or below. If your fund is classed as trivial you do not have to purchase an annuity and can receive the fund as a cash lump sum. If the fund is above £2,500 you must purchase an annuity and receive an income from the fund. If implemented, the simplification proposals would mean anyone with a fund valued upto £14,000 could take it all in the form of a cash lump sum.
Our View:
The current triviality limit is far too low, considering you must combine all pensions you have together. By increasing the limit to £14,000 many more people will be allowed to take their pension funds as cash. This will save a huge amount of administration for the pension providers and should save them money too. The only problem we see is that £14,000 is still a lot of money that could be frittered away. If the retiring person had to purchase an annuity they would still have received £3,500 in cash but an income from the rest. This would help support them in retirement, rather than having to possibly rely on State benefits.