What is a Trivial Commutation Payment?
Trivial Commutation is an option where members can take a taxable lump sum from the Local Government Pension Scheme (LGPS) in lieu of a small pension. Under certain circumstances, it is possible to commute a pension for a LGPS member, their survivor’s, eligible children or pension credit members provided that certain criteria are met.
Am I eligible for Trivial Commutation?
For a trivial commutation payment to be made, you MUST meet the following criteria:
- Be aged 60 or over (65 if you are a male with membership before April 1997);
- Taking all your LGPS benefits as a lump sum;
- The total value of all pension pots (LGPS and non-LGPS) must be less than £30,000;
- Not previously received a trivial commutation lump sum from any registered pension scheme or, if such a lump sum has been paid, the trivial commutation lump sum from the LGPS must be paid within 12 months of the day on which the first trivial commutation lump sum was paid to the member.
The pension pot (Capital Value) is worked out using the following equation:
20 x Annual Pension + 10 x Automatic Lump Sum (if applicable) = Pension Pot (Capital Value of your Benefits)
How is the Trivial Commutation Lump Sum calculated?
The Trivial Commutation lump sum is calculated by using factors issued by the Government Actuary’s Department (GAD). The amount of lump sum payable is determined by your gender and age at your last birthday. The example shows how the Trivial Commutation Payment is calculated.
Is the Trivial Commutation lump sum taxable?
Unlike your standard LGPS lump sum, the Trivial Commutation lump sum IS taxable. Tax would be deducted automatically at the standard rate of 20%.
Date of birth: 15 March 1952
Date of Commutation: 29 June 2015
Age at date of Commutation: 63
Member’s total pension: £500 per annum (pa)
Dependant’s pension on the member’s death: £180 pa
Member Factor: 17.13 (Fac1)
Dependant Factor: 3.31 (Fac2)
Trivial Commutation Lump Sum Payable:
(Member’s Pension x Fac1) + (Dependant’s Pension x Fac2)
(£500 x 17.13) + (£180 x 3.31) = £9,160.80 - 20% Tax = £7,328.64
The payment of a Trivial Commutation Lump Sum extinguishes your rights in the pension scheme and those of any dependants; this means that after the Trivial Commutation payment is made, NO further payments will be due to you or any dependants at any point in the future.
The Pension Fund is unable to provide you with any financial advice, therefore please consider seeking Independent Financial Advice when you retire to ensure that the most appropriate option is taken.
Please enquire if you wish to obtain further details regarding this option. This option is permitted at the time of taking your Pension benefits or if you are already receiving a pension.