Glossary · UK
What is Trivial Commutation?
A rule allowing small pension pots (total pension wealth up to £30,000, or individual DC pots up to £10,000) to be paid as a lump sum from age 55.
Full Definition
Trivial commutation allows pension benefits that are too small to be worth administering as an ongoing pension to be paid out as a one-off lump sum. There are two separate rules. Triviality (defined benefit and total pension wealth): if the total value of all your pension rights across all registered pension schemes is £30,000 or less, you may be able to commute the entire lot as a lump sum. You must be aged 55 or over. 25% is tax-free; the remaining 75% is taxable income. The £30,000 triviality threshold has been unchanged since 2012. Small pot commutation (defined contribution only): separately, each individual DC pension pot of £10,000 or less can be commuted, regardless of total pension wealth. Up to 3 personal pension pots can be commuted this way, but there is no limit on the number of occupational DC pots. 25% is tax-free; 75% is taxable. Importantly, taking a small pot lump sum does not trigger the Money Purchase Annual Allowance (MPAA) -- unlike flexi-access drawdown or UFPLS. This makes small pot commutation a useful planning tool for those who still wish to contribute to a pension after drawing some benefits. Rules on trivial commutation are complex; professional advice is recommended.