The fact that every provider does not have to offer trivial commutation is a key issue, says Andrew Tully, pensions technical director of MGM Advantage, who says the change in triviality is subject to providers and schemes altering their rules to allow this.
Mr Tully says: “Some may do that quickly, others will be slower and some may not choose to change at all. For example, the £2,000 standalone triviality rule was introduced on 6 April 2012 but many have not yet introduced it into scheme rules.”
For a defined benefit scheme, David Brooks, technical consultant at Broadstone Corporate Benefits, says there is not much that you can do if the provider does not offer trivial commutation.
However, Mr Brooks says it is often in the interest of the employer to reduce liabilities and paying trivial commutation lump sums is an acceleration of the benefit payments can achieve this.
If a scheme has a more restrictive measure, Mr Brooks says he would recommend pressing the employer and trustees to see if they can change the rules to allow the payment.
If the provider does not offer trivial commutation, Sharon Mitchell, head of UK administration operations at JLT Employee Benefits, says you could transfer to another provider that does offer trivial commutation.
But this would be subject to any transfer penalties, Ed Wood, Chartered Financial Planner at Saunderson House, points out.
He says: “Don’t rule out trivial commutation simple because the current pension provider says they do not offer it.”
