Triviality lump sums for defined benefit

In certain circumstances it is possible for a member of a defined benefits pension scheme to take all of their benefits as a one off lump sum using the trivial lump sum rules.

When a member reaches the age of 55, or earlier if they meet the ill health condition or have a protected pension age, if the combined value of all of their registered pension scheme benefits is not more than £30,000, they can take all of their defined benefits and any in-payment money purchase in-house scheme pension as a lump sum. This must include the value of any pensions in payment. Before the benefits can be taken on the grounds of triviality all of the following must apply:

  • No previous trivial lump sum can have been paid more than 12 months ago, but trivial payments made before 6 April 2006 can be ignored.
  • All of the benefits under the defined benefits scheme and any in-payment money purchase in-house scheme pension have to be taken at the same time.
  • The member must have some lifetime allowance (LA) available.
  • The total value of all the member's benefits (not just the defined benefits) can't be more than £30,000.
  • The member has to be at least aged 55, or earlier if they meet the ill health condition or have a protected pension age, but there is no maximum age. 
  • After the payment the member has no rights left in the scheme.

Nomination date and 12 month commutation period

When a member decides they would like to take some or all of their benefits as a trivial lump sum they can nominate a date at which all of their benefits are valued. This is called the 'nomination date'.

The combined value of all of the member's benefits at the nomination date is used to ensure that the total benefits value is no more than £30,000. The member then has up to 3 months from the nomination date to start taking their benefits.

If the first lump sum is not paid within the 3 month period, a new date must be selected and a new check carried out to ensure that the benefits value is no more than £30,000. The nomination date cannot be earlier than 3 months before the member's 55th birthday or protected pension age.

A default nomination date will be used if the member does not nominate a specific date, this will be the date of the first payment.

The member is not obliged to take all of their benefits as a trivial lump sum, but once the first lump sum is paid the member only has 12 months in which to take any other trivial lump sum benefits. This period is called the 'commutation period' and starts when the first payment is made. Once this commutation period has ended no further trivial benefits can be taken.

Trivial commutation lump sum payments may be paid in respect of different defined benefits schemes, but all payments must be made within a single 12 month period.

Valuing the benefits at the nomination date

It is only possible for benefits to be taken using triviality if the combined value of all of the member's pension benefits, including pensions in payment, is no more than £30,000.

In certain circumstances it will not be obvious if a member's benefits value exceeds £30,000. The following table sets out how the benefits should be valued:

Type of benefitCalculation of benefits value
Defined benefit scheme (scheme pensions)

Multiply the member's annual pension before commutation by 20. Where lump sums are provided otherwise than by commutation they are valued using a factor of 1:1 and are added to the above value. v

Money purchase scheme

The total market value of the funds/assets held.

Cash balance plan The value of the benefits as calculated in line with the scheme rules.
Annuity in payment before 6 April 2006 Multiply the member's annual annuity at 5 April 2006 by 25.
Income drawdown in payment before 6 April 2006 Multiply the relevant GAD maximum withdrawal at 5 April 2006 by 25.
Annuities/scheme pensions/ income drawdown in payment after 6 April 2006 The value of benefits at crystallisation.

How is it taxed?

The member can receive up to 25% of the lump sum tax-free. The rest is payable at the member's marginal rate of income tax. This means that if they currently pay tax at the 20% basic rate tax then 75% of the lump sum will be subject to this tax. It is important to be aware that taking lump sums from the pension in this way could push the member into a higher income tax bracket, which could mean that they need to pay more tax than they originally thought.

The scheme trustee is required to apply tax at the basic rate regardless of the amount of tax the member is actually liable for. This means that the amount of tax the scheme trustee deducts may be greater or less than the amount which should apply to the member. If the member thinks that they have paid too much or not enough tax then they will need to discuss this with HMRC.

If the member would have been entitled to more than 25% of their benefits value as tax-free cash at retirement, the amount that they can take tax-free on payment of a trivial lump sum will still only be 25%. The enhanced entitlement to tax-free cash will be lost.

If a pension in payment is commuted and taken as a trivial lump sum then none of the trivial lump sum will be tax-free.

PTM063500: Member benefits: lump sums: trivial commutation lump sum


The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.



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The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London, EC3V 0RL.