The long awaited Authorised Payment Regulations 2009 have been laid before Parliament.
Broadly these regulations allow the commutation (i.e. payment as a lump sum) of certain trivial pension pots that do not exceed £2000 and pensions or lump sums paid in error to be treated as authorised payments under the Finance Act 2004 so that they do not attract tax charges. These payments will also be taxed as pension income for the purposes of Income Tax (Earnings and Pensions) Act 2003.
The regulations that simplify the rules on trivial commutation come into force on 1 December 2009. The regulations on pensions or lump sums paid in error will have retrospective effect for any payment made on or after 6 April 2006