With effect from 1 December 2009, HMRC extended the circumstances in which trustees of registered pension schemes may permit trivial commutation of pensions into a single lump sum payment. Unfortunately, due to an error in the drafting of the 2009 Regulations, the changes did not extend to guaranteed minimum pensions. Members with a defi ned benefi t pension will have a guaranteed minimum pension element if they were contracted out of the State Earnings Related Pensions Scheme (the predecessor to the State Second Pension) between 6 April 1978 and 5 April 1997. With effect from 6 April 2010, this problem has been rectifi ed, with schemes able to offer commutation to members (or their surviving spouses) whose pensions have a guaranteed minimum pension element.
This correction to the commutation of benefi ts regime is contained in Regulation 2 of the Occupational and Personal Pension Schemes (Miscellaneous Amendments) Regulations 2010 (S.I. 499) which inserts revisions into existing Regulation 60(1)(b) of the Occupational Pension Schemes (Contractingout) Regulations 1996.
The new Regulations were laid before Parliament on 5 March 2010 and take effect on 6 April 2010.
To view them go to: http://www.opsi.gov.uk/si/si2010/uksi_20100499_en_1