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Tax breaks on lump sums for 'traditional' couples

Couples where one partner has no earnings but the other is willing to fund savings can make the most of tax relief on pension contributions and draw up to £18,000 lump sums under provisions called ‘triviality rules’.

These rules bring together two controversial aspects of pensions’ tax breaks. Firstly, non-earners who don’t pay tax can still have basic rate relief added to payments into pensions in their names.

In addition, where any person aged 60 or older has total pension funds of less than £18,000 they can draw up to 25pc tax-free for any purpose and take the rest as a lump sum, without and annuity or income drawdown.  

Pensions expert, Adrian Walker, pensions said: “It is not just the very wealthy that can benefit from the current pension legislation. The triviality rules mean even those on a low income, or who don’t work, can essentially ‘use’ the system to achieve some tax efficient savings for retirement and gain immediate access to their funds once they reach age 60. This is great news for those put off pensions by the normal restrictions in place when it comes to accessing funds.”

However experts also warn that HM Revenue & Customs will rein triviality rules in if they think the system is being abused.

For more information please contact Paul Bradshaw at McEwan Wallace Wealth Management on 0151 647 6682 or email enquiries@wallace.co.uk.