Trivial Commutation
The ability, under HMRC pensions tax rules, to convert small pension pots into a single cash lump sum rather than an ongoing pension, where the member's total pension savings fall below a prescribed threshold.
Independent editorial summary — not the official statute text. Read the official version on legislation.gov.uk.
Where someone's total pension savings across all their arrangements are small, requiring them to draw a conventional ongoing pension can be disproportionate — so tax law allows the whole pot to be commuted into one payment instead. HMRC's Pensions Tax Manual explains that 'the tax legislation provides for benefit rights to be commuted and paid as a one-off lump sum in certain circumstances', the first of which is 'where all of the conditions for a trivial commutation lump sum are satisfied.'
Trivial commutation is treated as a distinct, more tightly conditioned category than the related 'small lump sum' rules, and HMRC's guidance elsewhere confirms the tax treatment: for uncrystallised benefit rights, 25% of a trivial commutation lump sum is tax-free, with the remainder taxed as pension income at the member's marginal rate. Because the conditions are specific to trivial commutation lump sums as defined in the tax manual, schemes and advisers must check the detailed eligibility rules rather than assume any small pot automatically qualifies.
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Official sources
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