He was hoping to draw it all out in one go, sometimes known as using the Trivial Lump Sum or Triviality option. His problem is that the fund was worth £18,700 – which is more than the Triviality limit of £18,000.
He had visited his financial adviser at his bank, and was told there was no way he could get the lump sum out as a trivial lump sum. His only choice, he was told, was to take 25% as tax-free cash, and then choose an annuity for the rest of his life with the balance. The income he was quoted was around £680 each year.
My client was not happy. He was extremely disappointed that HIS pension fund would take roughly 20 years to be returned to him, and he didn’t know whether he was going to live for 20 years. He wanted his pension NOW!!
Now, this is where it pays to see a good Independent Financial Adviser.
The bank adviser was correct in many ways, but failed to explore my client’s circumstances sufficiently.
The pension was with Legal and General, and it turns out the pension was in their Managed Fund. Upon contacting Legal and General, I identified that the fund was indeed worth now £18,900. Too high for a Trivial Lump Sum?
However, I enquired with Legal and General whether there was any point within the last three months when the fund was valued below the £18,000 Triviality limit, as the Managed Fund is known to be quite volatile and can fluctuate widely. I also knew that in June this year, there was quite a sharp fall in equity prices.
As I expected, on the 26th June, the fund value fell to £17,790. The following days it increased again to beyond £18,000. What my client had not been told by his bank adviser was that he was permitted to use a ‘nomination date‘. The nomination date can be used to identify a point when the Triviality rules could have applied. Thankfully, my client used the 26th June as his nominated date. The result is that he could use the Triviality rules, as he wanted initially.
The result is one happy client. Just last week he had just under £16,000 paid into his bank account (after HMRC had taken their bit!). The fund had risen to £18,900 at the date that he eventually claimed his benefits, and the Triviality rules permitted him to keep the growth in the fund beyond the £18,000 limit.
My client was overjoyed by the advice he had received. My fee, for this work, for this client, was £295.00. Good value for money for some sound advice.
I would like to point out that this article is based on all the information presented to me by the client, and the research I undertook on his behalf. It is my professional opinion on the matter, and I would be more than happy to discuss any similar offers.
If you need advice on this or a similar matter, please give me a call on 01554 770022, and I will explain how I may be able to offer professional independent financial advice.