Trivial Commutation Delay

[whenyouresmiling]

An appeal for help please.

My sister died recently aged 55. My brother in law survives her, he is 66, he has learning difficulties and very poor health and few assets, I am helping him to try to sort out his finances.

My sister had an occupational pension and we contacted the provider to find out what was there and the options. They have written to my brother in law and said that he can take a pension of just over £1,000 p.a. They then say that "as your payment is under a certain level then you can take a one-off cash payment in exchange for the pension benefits in this scheme. This is called trivial commutation." They go on though to tell him that because of a recent High Court ruling involving Lloyds Bank they are unable to calculate this cash sum. Timescales are said to be unknown and it may be "some time before we are able to calculate the amount due."

In his situation my brother in law is probably going to prefer a cash sum now that could really help him now. However if the sum is unknown and there is a possibly lengthy delay there is a problem for him at an already very difficult time. I plan to call the pension provider next week but wondered if anyone had any knowledge of this case and any idea of what the impact could be and when it might be resolved? I wonder what my chances are of getting an estimated amount for him and a payment on account perhaps? His age, very poor health and financial situation put him in difficult position.

Thanks in advance to anyone who can help

[DrBunsenHoneydew]

An appeal for help please.

My sister died recently aged 55. My brother in law survives her, he is 66, he has learning difficulties and very poor health and few assets, I am helping him to try to sort out his finances.

My sister had an occupational pension and we contacted the provider to find out what was there and the options. They have written to my brother in law and said that he can take a pension of just over £1,000 p.a. They then say that "as your payment is under a certain level then you can take a one-off cash payment in exchange for the pension benefits in this scheme. This is called trivial commutation." They go on though to tell him that because of a recent High Court ruling involving Lloyds Bank they are unable to calculate this cash sum. Timescales are said to be unknown and it may be "some time before we are able to calculate the amount due."

In his situation my brother in law is probably going to prefer a cash sum now that could really help him now. However if the sum is unknown and there is a possibly lengthy delay there is a problem for him at an already very difficult time. I plan to call the pension provider next week but wondered if anyone had any knowledge of this case and any idea of what the impact could be and when it might be resolved? I wonder what my chances are of getting an estimated amount for him and a payment on account perhaps? His age, very poor health and financial situation put him in difficult position.

Thanks in advance to anyone who can help

In October 2018 there was an important High Court case involving the Lloyds Bank pension schemes. In that case the High Court ruled that pension schemes must adjust scheme benefits to remove gender inequalities caused by Guaranteed Minimum Pensions (GMPs) earned in the period 17 May 1990 to 5 April 1997.

Working out what the equalisation adjustments (if any) might be is a complex process and could take months to complete. Where members are affected, any required increase to benefits is likely to be relatively small.

Pensions, retirement lump sums, dependants’ pensions and transfers to other schemes are continuing to be paid while the trustees of Schemes consider the outcome of the case. However, the payment of trivial commutation lump sums, where you may get a one-off payment rather than a small pension income if your benefits are very small, are currently suspended for members whose benefits include a GMP built up between May 1990 and April 1997. This is because if a trivial commutation was to be paid, and then changed in the future, it could breach tax limits.

HMRC is expected to provide guidance in the coming months around various tax issues raised where GMP inequalities are addressed. However, timescales for this industry guidance are so far unclear and with another court hearing due in 2019 there is a lot more work to be done across the industry.

[whenyouresmiling]

Thanks very much for the helpful reply DrB.

I understand the complications but also see that my brother in law has just lost his wife, has pretty poor finances and poor and deteriorating health so I want to help him somehow. On a personal level this is tough for him.

I called the pension company, they gave no commitment but said that if I wrote and explained the position that they would see if there was anything they could do. However to get any chance of help we have to decline the annual pension and choose to take an unknown lump sum with no payment date! I don't think we have much alternative so I will write and hope they can do something.

[parallellines]

The trouble is that the pension limit issue identified by DrB could result in HMRC coming back to charge penalty taxes after the event. That would be the last thing you need. I think you'll struggle to get the pension scheme to agree to a lump sum payment now.

You could try asking them to pay the pension on an interim basis, but once the legal uncertainties have been resolved , then make an offer of a lump sum (provided the tax limit is no longer an issue) .